The stablecoin market has been consistently shrinking for the past 14 months, a worrying sign for the cryptocurrency market’s recovery. According to data firm CCData, the total market capitalization of stablecoins dropped to $130 billion in May, the lowest since September 2021.

Stablecoins are a subset of cryptocurrencies, whose value is pegged to an external asset, usually the U.S. dollar. They are essential for the digital asset ecosystem, providing a link between blockchain-based markets and government-issued fiat currencies.

Analysts say that the decrease in the stablecoin market is a major obstacle to cryptocurrency prices, as it signals a decrease in liquidity. Tom Dunleavy, macro analyst, commented: “Stablecoins are the liquidity of the crypto ecosystem. The more liquidity, the more ability for investment and speculation, which is why the continued reduction, despite the growing number of applications, suggests that we are still in a secular bear market.”

JPMorgan and Goldman Sachs both agree that cryptocurrency prices will not thrive until the stablecoin market stabilizes. Furthermore, trading with stablecoins dropped 40.6% this month to $460 billion on centralized exchanges, the lowest volume since December 2022.

An exception to this trend is the TrueUSD (TUSD) stablecoin, whose trading volume is increasing to $29 billion so far this month. It has surpassed USDC and BUSD, making it the second most traded stablecoin on centralized exchanges for the first time. This is due to Binance, the world’s leading crypto exchange, promoting the token’s use on the platform by eliminating trading fees for buying and selling bitcoin (BTC) with it.