Stablecoins are becoming much more popular than ever before. There used to be only a few leading stablecoins, with a few million dollars in trading volume. Now there are tons of them, handling trillions of dollars, which is more than Visa or Mastercard in 2022.
Yes, stablecoins are disrupting the traditional financial industry. Let’s have a look at the Twitter thread written by Patrick Hansen, the Circle Director, who pointed out some very interesting facts about stablecoins.
Stablecoins beat Visa or Mastercard in transaction volume
Numbers may differ from article to article, but one thing is clear. Stablecoins process more transactions in terms of volume than the largest payment providers like Mastercard or Visa.
According to Hansen’s tweet, over $7 trillion was settled through stablecoins in 2022 despite a prolonged crypto winter. Just to compare, Mastercard processed around $2.2 trillion in the same year. The amount of money going through stablecoins literally skyrocketed in the past few years.
Total value settled with stablecoins by year, source: coinmetrics.io
The market cap of stablecoins is rising gradually
Stablecoins may be backed by US dollars or euros, or even by gold. There are several different kinds of stablecoins, but each one of them must be backed either 1:1 (issued tokens vs backed assets) or overcollateralized.
Tether (USDT) market cap, source: coinmarketcap.com
Undercollateralization could lead to a depeg like in the case of Terra Luna. But as you can see from the chart, the leading stablecoin, Tether, has grown from only $2 billion market cap in early 2018 to around $68 billion market cap in 2023.
The rise in the use of cryptocurrencies and stablecoins is helping the industry to grow at a tremendous speed. This market cap will only grow with Tether issuing Chinese Yuan Tether or Euro Tether.
DeFi and stablecoins go hand in hand
The total stablecoin market cap only declined by around 5.7% in the bear market. On the other hand, the total value locked (TVL) of Decentralized Finance (DeFi) cryptocurrencies fell much sharper.
Stablecoins circulation compared to DeFi TVL, source: defillama.com
Moreover, stablecoins are basically working capital in DeFi. According to crypto.news, 77% of Optimism cryptocurrency TVL was made of stablecoins. This is an astonishing number. DeFi can reportedly cut costs of foreign exchange (forex) trading by 80%, and remember that stablecoins play a huge role in DeFi.
USDC is regarded as less speculative than USD itself
USDC market cap vs Bitcoin (BTC) price, source: twitter.com
USDC is also a notable player in the crypto industry, with around $45 billion in market cap. The chart shows how uncorrelated crypto prices are with stablecoins, meaning they grow with the size of the industry, not with the prices of cryptocurrencies. According to a Circle report, USDC is also regarded as less speculative than the US dollar itself.
“Payment stablecoins like USDC (only backed by cash & cash equivalents) are uncorrelated to the price of bitcoin or the trading volumes in associated trading pairs,” Hansen explained.
People love stablecoins
With higher inflation levels than in Europe or the United States, Latin America prefer to use stablecoins. More than a third of the population has made a regular purchases with a stablecoin in some regions, especially those with high inflation rates.
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Moreover, the majority of Web3 organizations questioned have already begun paying their overseas personnel in USDC or another stablecoin. Web3 companies are almost always international, with employees from all over the world.
Primary payment option for employees in Web3, source: framework.ventures
“Stablecoins – offering 24/7 instant settlement on a credibly-neutral, shared global ledger – will become a core part of the global payments infrastructure over the coming decade. The benefits are obvious. The data speaks for itself. Stablecoins are about to go mainstream,” Hansen stated.
Stablecoins offer several advantages when compared to traditional fiat currencies although they are of the same value. The blockchain allows the traditional industry to speed up and get more efficient. However, the regulatory questions are still not totally answered. But it’s clear stablecoins are going mainstream, as Hansen said.