If a long bear market is truly beginning in cryptocurrencies, then be thankful for stablecoins.
With the Defi Pulse Index (DPI) down 40% on the month and the overall crypto market losing a third of its market value, the stablecoin supply has continued to march upward.
Stablecoin supply grew 21% in the last 30 days to $69.92B, according to DeBank. That’s 4.56% of the market capitalization of the entire crypto space, almost twice the level one month ago.
Zooming out to a three month span, stablecoin growth has been steady even as benchmarks like DPI and ETH bounced around. Growth from Apr. 8 to May 8 was 26.23%, with the previous month hitting 20.54%
The takeaway: the growth of stablecoin supply appears to be uncorrelated with the overall crypto market, DeFi included.
Looking at a year of stablecoin growth tells a more dramatic story, with supply increasing by a multiple of more than nine, from $7.32B in early June 2020.
Stablecoins’ consistent performance indicates that users are not vacating the crypto ecosystem entirely but rather just seeking a safe harbor from a stormy market. This may be a bullish signal for DeFi protocols, which make extensive use of stable assets.
Protocol Revenue Drops
Despite stablecoins consistent growth, DeFi protocol revenue is dropping as evidenced by a chart by The Block.
This is probably due to reduced trading on decentralized exchanges like Uniswap, Sushiswap, and Curve Finance, all of which have recorded declining volume since mid-May.
Lending protocols, Compound, Aave, and MakerDAO, too have seen significant chunks of deposits drop out of their smart contracts, too, weakening their revenue streams.
Surprisingly Synthetix’s revenue has shown resilience despite the month’s downturn, perhaps drawing eyeballs as many DeFi protocols brace themselves for what could be their first bear market.
Synthetix generates revenue when users trade synthetic assets on the platform where trading hasn’t dropped like the decentralized exchanges above.
Overall, DeFi appears to have passed the first stress test, but the real question may be how well yields hold up during what may be a bearish period or worse, a second crypto winter.