There has been a rise of popularity of decentralized stablecoins amid the recent Tether and USDC scares.
šļø What's going on in stablecoin land?
š Who are the top players?
š£ļø Where are things headed?
Let's explore the stablecoin landscape. š
It seems like every other week we hear about a new stablecoin project launching.
So many different implementations of them. Before diving into all these different projects, it's important to take a step back and understand the current landscape.
The total stablecoin market cap has decreased to $128B from its $187B all time high in May of 2022 (32% decline).
Currently, the most dominant stablecoin, with 65% dominance, is @Tether_to $USDT.
It's interesting to see the fluctuations in stablecoin dominance over time.
$USDC was gaining market share against Tether throughout 2021 and 2022, but that trend reversed in 2023.
The USDC depeg in March has contributed greatly to large USDC redemptions.
The lion's share of stablecoins reside on Ethereum Mainnet (54%), with a surprisingly large amount living on Tron (34%).
Followed by BNB Chain (4.4%) and Arbitrum (1.35%).
Ethereum's stablecoin dominance can be attributed to multiple reasons.
1ā£ The rich DeFi ecosystem. (Ethereum currently holds 57% of DeFi TVL)
2ā£ Seen by most as the safest chain to mint assets.
3ā£ The growing rollup ecosystem.
If you're curious as to why I believe Ethereum can end up being seen as the canonical chain for valuable assets due to its rollup-centric roadmap, don't miss one of my first threads where I cover that thesis:
twitter.com/OvrCldJonny/status/1620436764404891655
Many people ask why Tron @trondao is second on the list of stablecoin MCap dominance.
You may have heard about @justinsuntron's $USDD experiment, but that's not the main reason why there is so much stablecoin liquidity on the chain.
There is more $USDT issued on the Tron network than on Ethereum ($40.4B on Tron and $35.8B on Ethereum).
The second largest stablecoin on Tron is @tusdio $TUSD with almost $2.4B, followed by $USDD ($545M) and $USDC ($360M).
So why would Tether mint so much on Tron?
Tron's low transaction fees makes it very attractive for exchanges and users to exchange USDT in an affordable way.
Transaction fees to transfer a TRC20 token can be a fraction of a cent.
Tron has also been partnering up with smaller governments to offer the infrastructure for their stablecoin transfers.
Exchanges also contribute to this volume, as users send USDT between their exchange accounts on the Tron network to save fees.
It'll be interesting to see the shift of where stablecoins will reside in the future with modern cross-chain communications like @circle's CCTP.
Allowing for native USDC to be minted/burned when being bridged will definitely shift the numbers of stablecoin volume on rollups.
Here's a timeline of stablecoin's dominance over the total crypto market cap over 2022 (and beginning 2023).
As we see, stablecoin marketcap dropped after the Terra collapse and the FTX collapse.
The market cap of stablecoins increased as traders rush to stable assets in a falling market.
As the bear market continued throughout 2022, many catastrophic events occurred such as the 3AC, LUNA and FTX collapses.
Increased fear and the wavering trust in crypto assets by many traders lead to the redemption of centralized stablecoins as people rather hold USD in their own bank accounts than a crypto-asset backed by USD in someone else's account.
This sidelined capital started to work its way back into the market as people onboarded their USD back into crypto throughout 2023 as prices started to increase again.
(The major outflow in March was due to the SVB event with USDC)
As crypto works its way back from its market cycle lows, investors are easing their way into stablecoins again.
There are more and more proven use cases for stablecoins emerging, and builders are taking notice.
This has lead to a large market opportunity for stablecoin providers and has sparked a stablecoin renaissance, with many innovative projects leading the way with creative economics.
Notable mentions are: @fraxfinance, @CurveFinance, @AaveAave, @vestafinance, etc.
Stablecoin projects will be competing on the following metrics:
1ā£ Liquidity
2ā£ Safety (peg stability)
3ā£ Yield opportunities
The tradeoffs between these metrics will lead to a wide range of stablecoin applications, and I'll try my best to cover them all in the future.
Some of my statistics and graphics come from @coingecko's 2023 stablecoins statistics report found here:
coingecko.com/research/publications/stablecoins-statistics
Screenshots from @DefiLlama's amazing stablecoin dashboard were also used in this thread.
Also shoutout to @TweetThreadFred for the wassie art!
If you're interested in diving deeper into who's behind the leading centralized stablecoins, I've made threads analyzing USDC, USDT, BUSD, USDP, TUSD and GUSD.
Note: some of the stats may be a little outdated but most of it is still relatively accurate.
Part 1:
twitter.com/OvrCldJonny/status/1635596679100649472
Centralized Stablecoin Analysis Part 2:
twitter.com/OvrCldJonny/status/1638148545479049216
What are your favourite stablecoin projects?
Which ones would you like me to cover in detail?
Let me know in the replies!
Centralized stablecoin enjoyoooors:
@_FabianHD
@pt1mfv_
@francescoweb3
@DeFiMinty
@schizoxbt
@Subli_Defi
@0xsurferboy
@rektdiomedes
@chilla_ct
@defi_mochi
@CryptoKoryo
@2lambro
@thelearningpill
@0xFlips
@crypto_yuvi
@burstingbagel