- Bitcoin, Ethereum, and XRP prices dropped sharply after reaching historic highs this month.
- The total cryptocurrency market capitalization declined from $4.2 trillion to $3.88 trillion within weeks.
- Major U.S. banking groups are warning Congress about potential risks from the new Genius Act stablecoin bill.
- The Treasury Department estimates up to $6.6 trillion could move out of traditional banks if stablecoins offer interest payments.
- Stablecoin competition is rising, with new rules encouraging entries from Wall Street, tech firms, and financial companies.
The value of cryptocurrencies, including bitcoin, ethereum, and XRP, fell significantly this week after reaching record highs. The drop comes as crypto investors recently celebrated the market reaching an all-time high of $4.2 trillion earlier in the month.
This week, bitcoin slid about 10%, decreasing from its all-time high of $124,000 to $114,000. Ethereum and XRP followed similar patterns. The decline happened as financial leaders and lawmakers issued warnings about the impact of new stablecoin regulations. The total market capitalization of all cryptocurrencies slipped to $3.88 trillion, according to Alex Kuptsikevich, chief market analyst at FxPro.
Banking organizations representing large institutions such as JPMorgan and Bank of America sent an appeal to Congress regarding the Genius Act stablecoin bill. The bill allows dollar-pegged stablecoin issuers to offer yields through affiliates, which industry leaders say could cause a mass shift of funds from banks. The Bank Policy Institute warned this shift could undermine the stability of the financial system by moving large volumes of deposits out of banks.
According to a Treasury Department report, if stablecoins are allowed to pay interest or yield, as much as $6.6 trillion could leave traditional bank accounts over time. The size of the stablecoin market could grow from $280 billion today to $2 trillion by 2028. “Banks power the economy by turning deposits into loans. Incentivizing a shift from bank deposits and money market funds to stablecoins would end up increasing lending costs and reducing loans to businesses and consumer households,” the report stated.
Stablecoins, which are digital tokens pegged to the value of the U.S. dollar, are facing increased competition. While Tether’s USDT remains a leader, new entries are coming from Wall Street firms, technology giants like Meta, and fintech companies such as Paypal and Stripe. Earlier this year, U.S. president Donald Trump’s advisor, David Sacks, said on the All In Podcast he hopes laws will eventually let stablecoin companies offer interest directly to holders.
< b>Eric Trump and Donald Trump Jr. have also spoken about their World Liberty Financial crypto venture, describing it as a challenge to Wall Street. In May, Eric Trump stated, *”Honestly, I would love to see some of the big banks go extinct, because, honestly, they deserve it.”*
The recent shift in the crypto market has increased concerns about a deeper market correction. Kuptsikevich reported, “The total capitalization fell back to $3.88 trillion, reaching its lowest level in more than two weeks. As expected, altcoins are falling the hardest, with ethereum and XRP losing about 5% in the last 24 hours, twice as much as bitcoin.” If bitcoin prices drop below $112,000, investors may see further declines in the coming weeks.
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