The Stability and Instability of Stablecoins in 2024
Stablecoins are a type of token that pegs its value to other assets, such as commodities or fiat currencies, in order to stabilize its price. By being linked to specific fiat currencies, assets, or commodities, most stablecoins act as a bridge between real-world assets and cryptocurrencies, mapping these assets onto the blockchain in the form of tokens.
Since 2014, companies like Tether and Circle have issued tokenized currencies backed by real-world financial assets such as bank deposits and short-term notes. Users can enter the cryptocurrency field directly through these companies, converting real-world deposits into newly minted stablecoins. Conversely, they can also convert stablecoins back into fiat currencies.
However, not all stablecoins are fully backed by tangible real-world assets. Decentralized stablecoins, such as DAI and AMPL, maintain their peg through mechanisms like over-collateralization of crypto assets or supply adjustments (rebasing), achieving the minting of stablecoins without the need for centralized entities while still maintaining their peg.
The true value of stablecoins lies in their ability to maintain their peg at all times, even during market fluctuations. Unfortunately, many stablecoins have failed this test. In this report, we cover the types of stablecoins, total market value, trading volume, and emerging stablecoin models.
Five key points from CoinGecko’s 2024 Stablecoin Status Report:
1. Fiat-backed stablecoins’ market value surged to $161.2 billion in 2024 but remained below the peak of $181.7 billion in 2021.
Although the market for fiat-backed stablecoins experienced growth in 2024, with a total market value of $161.2 billion, this figure still falls short of the historical peak of $181.7 billion in 2021.
2. Commodity-backed stablecoins grew by 18.1% in 2024, reaching $1.3 billion, accounting for only 0.8% of the market value of fiat-backed stablecoins.
As of August 1, 2024, the market value of commodity-backed stablecoins reached $1.3 billion. Although commodity-backed stablecoins have seen growth, with new entrants like Kinesis and VeraOne, they still represent a relatively small portion of the market, accounting for only 0.8% of the total market value of fiat-backed stablecoins.
3. Stablecoins account for 8.2% of the total market value of the global cryptocurrency market and have gained dominance during market downturns.
Stablecoins hold a 8.2% share in the global cryptocurrency market, with their market dominance increasing, particularly during market downturns.
4. 8.7 million addresses hold stablecoins, with 97.1% holding USDT, USDC, or DAI.
The majority of stablecoin holders primarily focus on USDT, USDC, and DAI, with approximately 97.1% of addresses holding these three stablecoins.
5. Stablecoins face challenges in maintaining their peg stability, especially during uncertain periods.
Despite stablecoins aiming to maintain their pegged prices, many stablecoins face challenges in maintaining stability during market volatility and uncertainty.
Since 2020, the total market value of the top ten fiat-backed stablecoins has grown significantly. In the bull market of 2020-2021, the market value surged from $500 million in early 2020 to $181.7 billion in March 2022, an increase of 3121.7%. After a decline due to the collapse of Terra and its UST stablecoin, the stablecoin market value reversed in November 2023. As of August 2024, the total market value of fiat-backed stablecoins has grown by 35.4%, from $119.1 billion to $161.2 billion.
The top three USD stablecoins are Tether (USDT) with a market value of $114.4 billion, USDC with a market value of $33.3 billion, and DAI with a market value of $5.3 billion, accounting for 94% of the total market value of stablecoins. Meanwhile, USDT’s market share has consolidated at 70.3%, while USDC’s market share has continued to decline since the US banking crisis in March 2023. Stablecoins pegged to other currencies, such as the Euro, Yen, and Singapore Dollar, only account for 0.2% of the market share.
1. Commodity-backed stablecoins grew by 18.1% in 2024, reaching $1.3 billion, accounting for only 0.8% of the market value of fiat-backed stablecoins.
As of August 1, 2024, the market value of commodity-backed stablecoins reached $1.3 billion. Although there has been growth in commodity-backed stablecoins, with newcomers like Kinesis and VeraOne, their market size remains relatively small, accounting for only 0.8% of the total market value of fiat-backed stablecoins.
Precious metals are the preferred commodities for supporting these stablecoins, but other commodity-backed stablecoins have been introduced in recent years. The Uranium308 project launched a stablecoin pegged to the price of U308 uranium compound, but the project has since ceased operations.
2. Stablecoins account for 8.2% of the total market value of the global cryptocurrency market and have further increased their dominance during market downturns.
As of August 1, 2024, stablecoins account for 8.2% of the total market value of the global cryptocurrency market. At the beginning of 2020, stablecoins had a relatively small share in the crypto industry, accounting for only about 2% of the global market value. However, during the initial rise of DeFi, it reached a peak of 6%.
The dominance of stablecoins significantly increased from November 2021 to May 2022, primarily due to the exponential growth of Terra’s UST stablecoin, which saw its market share rise from 4.8% to 15.6%. However, after the collapse of UST, stablecoins’ market share sharply declined, but it quickly rebounded to a high of 18.4% as investors sought stability during the subsequent bear market.
3. Stablecoins account for 8.2% of the total market value of the global cryptocurrency market and have further increased their dominance during market downturns.
As of August 1, 2024, stablecoins account for 8.2% of the total market value of the global cryptocurrency market. At the beginning of 2020, stablecoins had a relatively small share in the crypto industry, accounting for only about 2% of the global market value. However, during the initial rise of DeFi, it reached a peak of 6%.
The dominance of stablecoins significantly increased from November 2021 to May 2022, primarily due to the rapid growth of Terra’s UST stablecoin, which saw its market share rise from 4.8% to 15.6%. However, after the collapse of UST, stablecoins’ market share sharply declined. But with investors seeking stability during the subsequent bear market, market share quickly rebounded to a high of 18.4%.
4. 8.7 million addresses hold stablecoins, with 97.1% holding USDT, USDC, or DAI.
The top ten stablecoins have a total of 8.7 million holding addresses, with USDT, USDC, and DAI accounting for 97.1% of the addresses.
USDT has the highest number of holding addresses, with over 5.8 million wallets, which is 2.6 times more than its closest competitor, USDC. The remaining eight stablecoins have fewer than 1 million holding addresses, with DAI only being held by over 0.5 million wallets.
These stablecoins experienced rapid growth in 2020 but saw a significant slowdown in growth after the collapse of Terra in 2022 due to concerns about the solvency of other stablecoins.
5. Stablecoins face challenges in maintaining their pegged price stability, especially during uncertain periods.
In the past, stablecoins have struggled to maintain their pegged prices during periods of volatility. However, mature stablecoins like USDT, USDC, and DAI are now better able to maintain their peg to $1. Stablecoins typically experience deviations from their peg during market volatility, such as during the banking crisis in March 2023, due to uncertainties surrounding the security of Silvergate and Signature bank deposits.
Newer stablecoins, especially algorithmic-based ones like USDD, DAI, and FRAX, have greater volatility and rely on market arbitrage to maintain their peg. However, there have also been unsuccessful cases, such as Iron Finance and Basis Cash, where these projects failed to successfully maintain their pegged prices.
This article was originally published on DeepChain.
