The Stability and Instability of Stablecoins in 2024
Stablecoins are a type of token that anchors their value to other assets, such as commodities or fiat currencies, in order to stabilize their price. By being pegged to specific fiat currencies, assets, or commodities, most stablecoins serve 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 supported by real-world financial assets, such as bank deposits and short-term notes. Users can enter the cryptocurrency space 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 assets in the real world. Decentralized stablecoins, such as DAI and AMPL, maintain their peg through mechanisms like overcollateralization of crypto assets or supply adjustments (rebasing), achieving the anchoring without the need for centralized entities.
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 to pass this test. In this report, we cover the types of stablecoins, total market capitalization, trading volume, and emerging stablecoin models.
Five key points from the 2024 CoinGecko Stablecoin Report:
1. Fiat-backed stablecoins reached a market capitalization of $161.2 billion in 2024, but still below the peak of $181.7 billion in 2021.
Despite the growth of the fiat-backed stablecoin market in 2024, with a total market capitalization 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 capitalization of fiat-backed stablecoins.
While commodity-backed stablecoins experienced growth, their scale remains relatively small, with a market capitalization of $1.3 billion in 2024, accounting for only 0.8% of the total market capitalization of fiat-backed stablecoins.
3. Stablecoins account for 8.2% of the total market capitalization of the global crypto market and have increased their dominance during market downturns.
Stablecoins hold a 8.2% share of the global crypto market, particularly during market downturns, their dominance has further increased.
4. There are 8.7 million addresses holding stablecoins, with 97.1% holding USDT, USDC, or DAI.
The majority of stablecoin holders mainly focus on USDT, USDC, and DAI, with approximately 97.1% of addresses holding these three types of stablecoins.
5. Stablecoins still face challenges in maintaining their pegged stability, especially during uncertain periods.
Although stablecoins aim to maintain their pegged prices, many stablecoins face challenges in maintaining stability during market turmoil and uncertain periods.
Since 2020, the total market capitalization of the top ten fiat-backed stablecoins has grown significantly. In the bull market of 2020-2021, the market value surged by 3121.7% from $5 billion at the beginning of 2020 to $181.7 billion in March 2022. Following the collapse of Terra and its UST stablecoin, the stablecoin market value temporarily declined but reversed in November 2023. As of August 2024, the total market capitalization of fiat-backed stablecoins has grown by 35.4%, from $119.1 billion to $161.2 billion.
The top three USD stablecoins, Tether (USDT) with a market value of $114.4 billion, USDC with a market value of $33.3 billion, and Dai (DAI) with a market value of $5.3 billion, account for 94% of the total stablecoin market capitalization. Meanwhile, USDT has consolidated its market share at 70.3%, while USDC’s market share has been decreasing since the U.S. 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 capitalization of fiat-backed stablecoins.
As of August 1, 2024, the market capitalization of commodity-backed stablecoins reached $1.3 billion. Despite the presence of newcomers like Kinesis and VeraOne, Tether Gold (XAUT) and PAX Gold (PAXG) still account for 78% of this market capitalization. Although commodity-backed stablecoins have grown 212 times since 2020 and increased by 18.1% in 2024, they only account for 0.8% of the market capitalization of fiat-backed stablecoins.
Precious metals are the preferred supported commodities for these stablecoins, but other commodity-backed stablecoins have also emerged in recent years. The Uranium308 project launched a stablecoin pegged to the price of U308 uranium compound per pound, but the project has since ceased operations.
2. Stablecoins account for 8.2% of the total market capitalization of the global crypto market, and their dominance further increases during market downturns.
As of August 1, 2024, stablecoins account for 8.2% of the total market capitalization of the global crypto market. At the beginning of 2020, stablecoins had a very small share in the crypto industry, accounting for only about 2% of the global market capitalization. However, during the early rise of DeFi, their market share reached a peak of 6%.
The dominance of stablecoins significantly increased from November 2021 to May 2022, mainly due to the rapid growth of Terra’s UST stablecoin, which increased its market share from 4.8% to 15.6%. However, after the collapse of UST, stablecoins’ market share plummeted, 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 capitalization of the global crypto market, and their dominance further increases during market downturns.
As of August 1, 2024, stablecoins account for 8.2% of the total market capitalization of the global crypto market. At the beginning of 2020, stablecoins had a very small share in the crypto industry, accounting for only about 2% of the global market capitalization. However, during the early rise of DeFi, their market share reached a peak of 6%.
The dominance of stablecoins significantly increased from November 2021 to May 2022, mainly due to the rapid growth of Terra’s UST stablecoin, which increased its market share from 4.8% to 15.6%. However, after the collapse of UST, stablecoins’ market share experienced a sharp decline but quickly rebounded to a high of 18.4% as investors sought stability during the subsequent bear market.
4. There are 8.7 million addresses holding stablecoins, with 97.1% holding USDT, USDC, or DAI.
The top ten stablecoins have a total of 8.7 million addresses, with the top three stablecoins (USDT, USDC, and DAI) accounting for 97.1% of the addresses.
USDT has the highest number of addresses, with over 5.8 million wallets, which is 2.6 times more than its closest competitor, USDC. The remaining eight stablecoins have less than 1 million addresses, and DAI is only held by over 0.5 million wallets.
These stablecoins experienced rapid growth in 2020 but slowed down significantly after the collapse of Terra in 2022 due to concerns about the solvency of other stablecoins.
5. Stablecoins still face challenges in maintaining their pegged stability, especially during uncertain periods.
In the past, stablecoins have struggled to maintain their pegged prices during periods of volatility. However, more mature stablecoins like USDT, USDC, and DAI are now better able to maintain their peg to the US dollar. Stablecoins often experience depegging during market turbulence, 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 stablecoins like USDD, DAI, and FRAX, have greater volatility and rely on market arbitrage to maintain their peg. However, there have also been many cases of failure, such as Iron Finance and Basis Cash, where these projects have failed to maintain their pegged prices.
This article is a collaboration and was originally published by Deepchain.