Stablecoin: historical record for market capitalization

The market capitalization of stablecoins has reached a new all-time high.

There are, however, different types of stablecoin, and in this specific case, only those pegged and fully collateralized in fiat currencies are examined, thus excluding those pegged to other assets (such as gold or other cryptocurrencies), and those that are algorithmic.

The record of stablecoin in market capitalization

According to the data from DefiLlama, the overall market capitalization of stablecoins has exceeded 169 billion dollars.

However, this data takes into consideration all stablecoins pegged to fiat currencies, including algorithmic ones.

Examining even the algorithmic ones, like UST which failed in 2022, the all-time high would be at the end of April/beginning of May 2022, when just before the implosion of the Terra/Luna crypto ecosystem, due precisely to the loss of the UST peg, 187 billion dollars were reached.

At the time, UST was effectively the third largest stablecoin by market capitalization, with more than 18 billion dollars. Excluding these, the figure drops to less than 169 billion dollars.

Therefore, excluding UST, the overall market capitalization of fiat-pegged stablecoins has reached its all-time high in recent days. Even excluding all other algorithmic stablecoins, the all-time high is the current one.

The comparison

On DefiLlama it is possible to apply filters to these charts.

For example, excluding all algorithmic stablecoins, such as UST, in 2022 the peak was 167 billion dollars, reached in March.

Instead, the current level has risen to almost 168 billion, therefore slightly higher compared to the maximum of 2022.

Excluding also those criptovalute that are pegged to fiat currencies but collateralized in criptovalute (such as DAI), the peak of 2022 drops to 155 billion dollars, reached in April, while the current level is well above 158.

So the biggest difference compared to the peaks of 2022 is precisely that of the stablecoin anchored to the US dollar and collateralized in dollars.

It should be emphasized that the first 11 stablecoins anchored to fiat currencies and collateralized in fiat currencies are dollar stablecoins, and that the first in another fiat currency, Anchored Coins AEUR (AEUR), has a very marginal market capitalization, even less than 70 million dollars.

From this data, it clearly emerges how the stablecoin market anchored to fiat currencies is literally dominated by those collateralized directly in fiat, and in particular those collateralized in US dollars.

The stablecoin anchored to other fiat currencies turn out to be almost irrelevant, like the algorithmic ones. Those anchored to the dollar but collateralized in other assets have a slightly higher weight, but still very limited.

Tether

To all this must be added that within the cauldron of stablecoins pegged to the US dollar and collateralized in dollars, USDT by Tether. literally dominates.

Taking into consideration only the stablecoins pegged to the US dollar and collateralized in dollars, its dominance is 74%, but even extending the calculation to all stablecoins pegged to fiat currencies, and not just the dollar, and to those algorithmic or collateralized in other assets, its dominance only drops to 69%.

Therefore, in the relatively small group of stablecoins pegged to the US dollar and collateralized in dollars, the market capitalization of USDT alone is almost three times that of all other stablecoins combined.

Overall, however, USDT capitalizes more than double all other stablecoins pegged to existing fiat currencies.

USDT has grown especially in recent months, particularly since November 2023.

The bulk of the growth, in fact, occurred between 2020 and the beginning of 2022, but during that period, almost all stablecoins had grown. It is enough to say that UST had reached a market capitalization of 18 billion dollars when USDT was around 80 billion.

After the implosion of UST, even USDT lost market capitalization, but it limited itself to dropping to 65 billion dollars.

At the beginning of 2023, it started to recover what it had lost in the previous year, eventually returning above 80 billion in April of last year.

In November, however, a new rise began, still ongoing, which brought it above 90 billion in December. Then in March of this year, even above 100 billion. Now it is at 117 billion dollars, still growing.

The reasons for the growth

Taking into consideration the entire stablecoin sector, the hypothesis circulating regarding the possible causes of this year’s growth is that new money is simply entering the crypto sector.

In the world of finance, the terms “bull” and “bear” are often used to describe market trends. A “bull” market is characterized by rising prices, while a “bear” market is marked by falling prices. Understanding these concepts is crucial for investors.

This is due in particular to the fact that the highest record, proportionally, was registered by stablecoin collateralized directly in fiat currency.

In fact, for every new dollar of fiat-collateralized stablecoin, a real dollar must necessarily have entered the crypto market. This is because these are issued only against receipts of real dollars.

This reasoning, however, does not apply to algorithmic stablecoins and those collateralized in other assets. As highlighted earlier, these are not the ones that have significantly increased the market capitalization of stablecoins.

So if in October 2023 the overall market capitalization of stablecoins directly collateralized in fiat currencies had dropped to 115 billion, and now it has risen to over 158 billion, it means that in less than a year at least another 43 billion dollars have literally entered the crypto markets.

However, it is necessary to make two clarifications in this regard.

The first is that, obviously, other dollars could have also entered, in the form of real dollars, but it is not possible to calculate how many.

The second is that, in theory, it is not certain that all 43 billion dollars that have definitely entered the crypto markets have already been used to buy cryptocurrencies.

Regarding the origin of these 43 billion dollars, the circulating hypothesis is that they mainly come from retail investors or speculators, and not from institutional ones. Institutional investors prefer to use real dollars instead.