Analyze the stablecoin landscape from three perspectives: market share, trading volume, and speculation

by Pedro M. Negron, Medium; Compiler: Song Xue, Golden Finance

Over the past year, the stablecoin industry has undergone significant changes due to regulatory changes, crises, and emerging opportunities, each of which has left its mark on the industry. USDT experienced significant growth, while USDC shrank after the regional banking crisis. DAI has recently taken center stage in on-chain trading volume, thanks to its innovative stablecoin strategy of depositing funds into short-term US Treasury bonds, which currently offer a higher annual yield (APY). Finally, we also looked at how the recent increase in the price of the cryptocurrency market has affected the flow of stablecoins on exchanges.

USDT’s market capitalization has recently reached new highs, cementing its position as the most widely adopted stablecoin in the cryptocurrency market.

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Stablecoin market capitalization

Over the past year, several major players in the stablecoin market have experienced a variety of events. BUSD, which was once the third-largest stablecoin in the market, had to cease operations due to legal issues with the US authorities. ** Since the incident, Binance BUSD’s operator, PAXOS, has been limited to processing user withdrawals, resulting in a gradual decrease in market capitalization as withdrawals are made. USDC also faced a major setback as it found its $3.3 billion in reserves, which are essential to maintain a $1 pegged exchange rate, held in troubled Silicon Valley Bank. **

This series of events allowed USDT, which is already the largest stablecoin, to attract new users and further expand its market share. **

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Market Cap Share

As events within the stablecoin industry allowed Tether, the entity behind USDT, to grow and control the market, USDT dominated the market. The giant currently has a market capitalization of $84 billion and a stablecoin market share of 68%,** cementing its position as the market’s leading stablecoin provider.

Although Tether has established itself as a leading stablecoin provider, there is still potential for further growth and innovation in the space. This trend is particularly noteworthy, as some stablecoin providers now offer cryptocurrency users the opportunity to generate yield. These stablecoins are then used to buy short-term U.S. Treasuries, which currently offer the highest returns since 2007. This mechanism enables stablecoin holders and cryptocurrency users to access the U.S. bond market without directly participating in the U.S. bond market. **

! [lFjwssk0R6JZTbM0aoUlswJdA4jbqrisAxx2v1sc.png] (https://img-cdn.gateio.im/webp-social/moments-901ff9e656-2c0f8de141-dd1a6f-cd5cc0.webp “7128929”) on-chain transaction volume

MakerDAO, the protocol behind DAI, has played a key role in leading this trend as a major innovator. With the relaunch of DSR (Dai Savings Rate), MakerDAO enables users to lock their DAI holdings in smart contracts, resulting in a return on assets. ** This new move to buy US bonds was fully launched in August 2023 when the DSR rate peaked, and DAI has seen a significant increase in on-chain trading volume since then. Clearly, advanced users are hungry for a return on investment, with transactions over $100,000 accounting for more than 90% of DAI’s total trading volume. In the past two weeks since October 15, DAI has been firmly at the top of the stablecoin chain in terms of trading volume. This achievement is significant, especially considering that it is the third-largest stablecoin by market capitalization, which sends a clear signal in the industry.

Finally, the recent rise in the price of crypto assets is also clearly reflected in the stablecoin market.

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Trading liquidity

**The Trade Flow Indicator, which refers to assets moving in and out of the exchange, has shown a consistent inflow trend. ** The inflow of funds is usually related to users selling assets on exchanges, which is why they transfer their assets to these exchange platforms. This indicates that users are currently using their previously held stablecoins to purchase crypto assets, which is consistent with the recent price spike. **

In conclusion, the stablecoin market has undergone significant changes over the past year, characterized by regulatory challenges, crises, and innovative strategies. ** Despite setbacks faced by some major players such as BUSD and USDC, USDT emerged as the dominant stablecoin with a market cap of $84 billion, accounting for 68% of the market share. However, there is still room for growth and innovation in this space, as exemplified by the trend of investing in short-term US Treasuries to earn locked-in stablecoin yields. ** MakerDAO was instrumental in pioneering this initiative, especially the relaunch of its DSR. The recent spike in cryptocurrency prices has also been noticeable in the stablecoin market, particularly with users buying crypto assets, resulting in a continuous flow of funds into exchanges.

Source: Golden Finance