Stablecoins have emerged as an integral component of the digital asset ecosystem, playing a crucial role as the base currency for both centralized and decentralized trading platforms.
In 2017-2018, the first significant stablecoin gained considerable popularity, starting from zero and eventually reaching a market capitalization of $186 billion by May 2022. This surge was primarily driven by tokens such as Tether, Binance USD, and USDC.
In a recent tweet by Glassnode, the total circulating supply of stablecoins currently stands at around $124 billion, which marks a decrease of approximately $39 billion from the previous value of $163 billion. This decline can be attributed to the bear market experienced in 2022-2023. Among the stablecoins, the majority of dominance lies with USDT at 67.45%, followed by USDC at 22.82%, BUSD at 3.4%, DAI at 3.8%, and TUSD at 0.025%.
The stablecoin market was significantly affected by the bear market in 2022-2023, and this downturn also impacted the total market capitalization of the top 10 cryptocurrencies, which fell by nearly $50 billion within a year.
The market crash was triggered by the algorithmic stablecoin TerraUSD (UST) and its associated cryptocurrency LUNA, resulting in a loss of approximately $40 billion. This collapse had a profound influence on the overall cryptocurrency market, eradicating around $60 billion of investors’ wealth.
Tether, known for its substantial market capitalization, experienced two instances of de-pegging in 2022. The first occurred during the Terra crash, and the second happened during the closure of FTX. Similarly, USD Coin briefly faced de-pegging in March 2023 due to its exposure to the now-defunct Silicon Valley Bank.
In 2023, the fallout from the FTX crash claimed another significant victim within the stablecoin space. Binance seized BUSD after anxious investors withdrew their funds from the Binance exchange.
Data by Glassnode suggest that Bitcoin and Ethereum have been attracting significant investments, resulting in positive net inflows. Bitcoin has seen an estimated inflow of around $4.47 billion, while Ethereum’s net inflow averages approximately $3.5 billion.
The value of the metric for stablecoins is negative, implying that more money is leaving stablecoins than entering them. While Bitcoin and Ethereum drive larger inflows, stablecoins have been trying to offset these inflows by experiencing negative values, signifying a movement away from stablecoins.
According to CoinMarketCap, over $18 billion worth of USDT tokens were held by large or institutional investors in July 2022, accounting for 24% to 40% of the total supply. There were approximately 25,000 addresses holding more than $100k worth of USDT. Nearly 50% of these addresses held these tokens for a minimum of 12 months.