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Crypto asset services company Matrixport has noted that the liquidity squeeze in the stablecoin market is weakening short-term buying power in the cryptocurrency market. According to Mars Finance, Matrixport, in its analysis and charts published today, emphasized that the GENIUS bill currently under consideration in the US could have significant consequences for stablecoin issuers.
According to the analysis, if the bill comes into effect, stablecoin providers are expected to be prohibited from distributing interest or yield. This could lead investors to redirect their funds to alternative yield-generating products such as tokenized money market funds. Matrixport states that this process, particularly in the stablecoin ecosystem, reduces liquidity and suppresses the short-term purchasing power of crypto markets.
The report notes that USDC experienced approximately $6.5 billion in net redemptions over the past six weeks. This development led to a significant decrease in stablecoin supply, reducing the influx of fresh capital into the cryptocurrency markets. Simultaneously, investors shifted away from stablecoins towards traditional safe-haven assets like gold and silver, further deepening the liquidity crunch.
On the other hand, Circle is said to be giving a strategic response to these changing market conditions. The company is reportedly shifting its approach from evaluating stablecoins solely based on market capitalization to one focused on “transaction volume and usage.” Through its Circle Payment Network and partnerships with companies like Intuit, Circle aims to make stablecoins more widespread in daily payments and real-life use.
According to Matrixport, this transformation could strengthen the long-term role of stablecoins, but in the short term, it may lead to a continued cautious outlook in the crypto markets.
*This is not investment advice.