Stablecoins: The Stalwarts of the Crypto Market Amidst Volatility, Surpassing $142 Billion in Market Cap
Stablecoins have been making waves in the crypto ecosystem, witnessing an impressive surge as they recently hit an all-time high of $142 billion in market capitalization. This significant milestone can be attributed to several key developments, with the resurgence of Circle’s USDC (USD Coin) and the continued growth of tether (usdt) taking center stage.
Stablecoins: A Necessary Component in the Crypto Market
The global crypto market capitalization currently stands at $2.25 trillion, marking a 7.33% increase within the last 24 hours and a whopping 99.41% growth from the previous year. With bitcoin (btc) holding a dominance of 49.4%, its market capitalization amounts to $1.11 trillion.
While bitcoin and other cryptocurrencies are known for their volatility, stablecoins serve as a crucial counterbalance. Designed to maintain a consistent value by pegging them to external assets like fiat currencies or commodities, stablecoins offer stability and act as a hedge against the price fluctuations of other digital currencies.
Exploring Popular Stablecoins in the Market
Some well-known stablecoins currently available in the crypto market include:
- tether (usdt): Pegged to the US Dollar.
- USD Coin (USDC): Also pegged to the US Dollar.
- dai (DAI): Maintained through over-collateralization in the MakerDAO system.
- Binance USD (BUSD): Backed by US dollars held in reserves.
- TrueUSD (TUSD): Fully collateralized by US dollars held in escrow accounts.
- Paxos Standard (PAX): Each token represents one US Dollar held in reserve.
The Rise and Shine of Stablecoins: Market Performance
According to CoinGecko, the entire stablecoin market saw its valuation surpass $142 billion in February 2023, marking the highest level since December 2022. This expansion was initiated in early November following an 18-month decline. Since then, the market cap has seen a notable increase of approximately 12%, or roughly $15 billion.
tether (usdt) was the driving force behind stablecoin growth late last year, but this year’s expansion is more broad-based. USDC, for example, has experienced a revival, growing from $24 billion to over $28.5 billion at the beginning of this year.
USDC’s recovery can be attributed to bitcoin’s surge being primarily driven by strong U.S. investor demand, where USDC is popular among traders. Meanwhile, tether remains the most preferred currency for traders in Asia, Africa, and Latin America using offshore exchanges such as Binance.
A Closer Look at the Current Performance of Select Stablecoins
At the time of writing:
- dai (DAI): The current price is $0.9998 per DAI/USD, with a market cap of $5.35 billion USD and a 24-hour trading volume of $134.19 million USD.
- Binance USD (BUSD): The current price is $1.002804 per BUSD/USD, with a market cap of $84.75 million USD and a 24-hour trading volume of $28.84 million USD.
The remaining stablecoins’ current prices, market caps, and trading volumes are as follows:
- TrueUSD (TUSD): Current price is $0.976585 per TUSD/USD, with a market cap of $1.26 billion USD and a 24-hour trading volume of $117.15 million USD.
- Paxos Standard (PAX): Current price is $1.00 per PAX, with a market cap of $207.86 million USD and a circulating supply of 207,754,730.881 PAX.
These stablecoins are instrumental in facilitating transactions and providing stability within the volatile crypto market.
The Unyielding Influence of Stablecoins
USDC’s recent recovery can be attributed to strong U.S. investor demand, where USDC is popular among traders. Additionally, Binance relisted several USDC trading pairs late last year and the launch of bitcoin spot ETFs in the United States, which primarily use Coinbase for btc settlements. This has expanded USDC’s influence slightly outside of U.S. markets.
As reported in a Coinbase market analysis, USDC is now used for approximately 4% of derivative and spot trade settlement on worldwide centralized exchanges, up from less than 1% in mid-2023.
