CryptoCompare is delighted to announce the release of CryptoCompare’s first Stablecoins & CBDCs Report, the latest addition to CryptoCompare’s monthly suite of research.
Stablecoins have grown to become a prominent subsector of the digital asset industry since the launch of Tether in 2014. Since then, the stablecoin sector has grown significantly in size and interest, reaching a peak of $188bn on April 2nd, 2022.
However, recent developments surrounding stablecoins, including the collateralisation of Tether and the collapse of TerraUSD, have raised concerns from investors and regulators. Despite this, stablecoins have started to extend from the digital world of crypto into financial environments – as governments and organisations look at how they can incorporate stablecoins and blockchain into traditional systems.
In this report, we provide insight into the latest developments in the stablecoin and CBDC sector, focusing on analysis that relates to market capitalization, trading volume, and stablecoins, segmented by their type based on collateral, type of pegged asset, and more.
You can access the report here.
Key takeaways:
- In January, Tether (USDT) reached its highest stablecoin market share since October 2021. The popular stablecoin – USDT – saw its market share rise 0.82% to $66.7bn, increasing its market share to 48.7%. USD Coin, Binance USD and Gemini Dollar were the only stablecoins to record a decline in market capitalisation in January.
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Stablecoin net flows reached its highest level since November 2021, with $3.65bn leaving exchanges in December after concerns over Binance’s solvency emerged earlier in the month.
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Developers announced the shutdown of Waves’ NeutrinoUSD and Vader Protocol’s USDV after failing to restore their peg, the latest additions to the list of failed algorithmic stablecoins. The market share of algorithmic stablecoins is currently at 1.71%, down from an all-time high of 12.4% in April 2022.
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Stablecoins trading volume rose 9.46% to $397bn whereas the spot trading volume rose 10.2% to $121bn in January. This resulted in the fiat dominance rising to 23.4% from 23.1% in December, recording the fourth consecutive increase after making an all-time low of 21.1% in October.
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Concerns over the solvency of the centralised exchange, Huobi, which is partly owned by Justin Sun, coincided with the depeg of stablecoins in the Tron ecosystem. USDD, which is an overcollateralized stablecoin backed by TRX, BTC, USDT and USDC, depegged to a low of $0.973, while USDJ to a high of $1.126 in January.
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Total Stablecoin Market Cap Declines for 10th Consecutive Month
In January, the total market capitalization of stablecoins fell 0.62% to $137bn, the lowest stablecoins market cap since September 2021. This is the tenth consecutive month of decline in stablecoins market capitalisation.
Monthly stablecoins spot trading volume as of January 22nd has already surpassed the trading volume in December, rising 9.46% to $397bn, buoyed by the return of volatility in the market.
Top 3 Stablecoins Continue to Dominate Market Share
The top 10 stablecoins remained unchanged with USD Coin (USDC), Binance USD (BUSD) and Gemini Dollar (GUSD) being the only stablecoins to record a decline in market capitalisation in January. USDT, USDC and BUSD currently account for 91.8% of the total stablecoin market capitalisation.
The market capitalisation of Tether (USDT) rose 0.82% to $66.7bn, increasing its market share to 48.7% – the highest dominance recorded since October 2021. Meanwhile, USDC and BUSD saw their market capitalisation fall 2.27% and 3.97% to $43.1bn and $16.1bn respectively.
Stablecoin Outflows from Centralised Exchanges Spiked In December
Centralised exchanges saw the largest net outflow of stablecoins since November 2021 in December 2022, with rumours over the solvency of Binance leading to net outflows of $3.65bn from all CEXs. Binance saw a record net outflow of $13.1bn in December after a discrepancy in the scope of its Proof of Reserves audit raised concerns over its liquidity.
January data as of the 22nd shows that the current trend of users moving their assets off exchanges is likely to continue with CEXs recording a net outflows of $1.17bn.
‘Stablecoin Wars’ Heats Up as Coinbase Encourages Swapping USDT to USDC
On December 8, Coinbase made an announcement introducing a zero-fee trade to swap USDT for USDC, the latest turn of events in the ‘Second Great Stablecoin War.’ The exchange, which co-founded USDC in partnership with Circle, cites that stability and trust is the main driver for the support for the stablecoin. USDC currently accounts for less than 1% of the stablecoins trading volume on Coinbase.
Exchanges are appearing to show a preference for certain stablecoins, thus encouraging – or at times forcing – users to switch to a stablecoin of its choice. For example, earlier in 2022 Binance introduced its BUSD auto-conversion feature, which automatically converted users’ balances of USDC, USDP and TrueUSD to BUSD on a 1:1 basis, to enhance liquidity and capital efficiency.
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The information provided by this report does not constitute any form of advice or recommendation by CryptoCompare. Any redistribution of charts appearing in this Review must cite CryptoCompare as the sole provider and creator.
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