Stablecoins are a type of cryptocurrency whose main property is to maintain stable prices of assets. Unlike popular cryptocurrencies such as and which often exhibit high volatility, stablecoins are pegged to more stable underlying assets, including fiat currencies such as , , and even fiat currencies. This makes dramatic price movements less likely, which is very useful in the crypto market.
In trading, stablecoins are typically used as quoted assets for trading pairs, acting as a tool to maintain the fiat value of trades and eliminating the need to withdraw cash. In a sense, stablecoins serve as the fuel for cryptocurrency trading, providing undeniable convenience for trading. Without this, the process is likely to resemble what Bitcoin looked like in its early days.
Stablecoin market capitalization reaches $173 billion
A new milestone in overall stablecoin market capitalization is now $173 billion, indicating the market needs even greater liquidity to organically drive growth and trading activity across networks. . The current phase of continuous issuance of stablecoins began in September 2023, just as Bitcoin managed to break out of a long price stalemate and subsequently reached an all-time high of $73,750 in March 2024. It was time.
Key players in the stablecoin market
(USDT) is the largest player in the stablecoin market, accounting for approximately 69.5% of the total market capitalization. USDT is issued on a number of popular blockchains, including Ethereum. Other major players in the market include Circle and decentralized stablecoins. The latter, unlike USDT and USDC, utilizes a more decentralized governance approach and is backed by other crypto assets.
“USDT and USDC currently account for nearly 50% of the total trading volume of major crypto assets, highlighting the important role stablecoins play in providing liquidity and stability to the market. “DeFi analytics platform IntoTheBlock tweeted.
How exchanges drive stablecoin growth
After all, stablecoin issuers’ business models are closely tied to major blockchain and crypto exchanges, as most user demand for stablecoins emanates from such platforms. Regarding the increase in stablecoin market capitalization, Pauline Shanguette, CMO of crypto exchange ChangeNOW, commented as follows:
“In general, an increase in the supply of a stablecoin suggests that more funds are being pumped into the protocol, indicating an increase in liquidity across the network. More stablecoins in circulation usually means more trading activity, as stablecoins provide instant liquidity for traders looking to trade positions on exchanges. This is for quick entry and exit. ”
Impact of stablecoins on the market
Over the past few years, traditional finance stakeholders have become increasingly aware of the usefulness of stablecoins as financial products. Companies such as PayPal (NASDAQ:), Revolut, and Japan’s Sony Bank have already introduced or announced trials of their own stablecoins, suggesting widespread mainstream adoption in the near future. .
“Together, the top five stablecoins hold more U.S. Treasuries than some G20 countries, such as South Korea and Germany. “This is a net positive for the broader financial system,” said Bitwise analysts Juan Leon and Ali. Bookman said in a recent report.
In their current form, stablecoins have become a fundamental part of the cryptocurrency industry, serving as a means of trading, storing, and transferring value. Therefore, stablecoin market capitalization is a reliable indicator of the overall state of the cryptocurrency market and can be used to predict potential market movements.
