Research Report on Stablecoin Performance in 2023: Unveiling Trends, Insights, and Predictions
Step into the realm of stability and innovation with our comprehensive Stablecoin Report for 2023. In a world where finance is rapidly embracing digital transformation, stablecoins have emerged as a crucial element, offering a unique combination of digital power and traditional reliability. As we navigate the ever-changing landscape of the cryptocurrency industry, this report delves deep into the performance of stablecoins in 2023.
Explore how these digital currencies, which are pegged to real-world assets or algorithms, have not only withstood the volatility of the market but have also played a vital role in bridging the gap between digital and fiat currencies. Join us on a journey through the evolving world of stablecoins and their profound impact on the future of finance.
1. Analyzing Stablecoins: Market Capitalization
The dynamics of stablecoins in 2023 demonstrate varying degrees of stability, with Tether leading the pack in resilience while others navigate subtle shifts and challenges in the evolving digital currency landscape.
The graph below illustrates the market capitalization-focused analysis of a few stablecoins, including USDT, BUSD, USDC, USDP, and DAI.
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Stablecoins
December 3, 2023
6-Month Performance %
1-Year Performance %
5-Year Performance %
USDT
$89.674 billion
-0.26%
+0.01%
+1.48%
BUSD
$1.653 billion
+0.01%
-0.07%
-0.12%
USDC
$24.51 billion
-0.33%
-0.06%
-1.00%
USDP
$446.636 million
+0.02%
+0.16%
-1.00%
DAI
$5.348 billion
-0.11%
-0.01%
-0.61%
The chart and table clearly demonstrate that in 2023, stablecoins, which are digital currencies pegged to traditional currencies, exhibit diverse market performances.
Tether (USDT), with a market capitalization of $89.674 billion, maintains stability despite a marginal 6-month decline of -0.26%. Over one year, it shows resilience with a negligible 0.01% increase, while the 5-year performance demonstrates a modest rise of +1.48%.
Binance USD (BUSD), valued at $1.653 billion, showcases a slight positive trend, gaining +0.01% in the last six months. However, its 1-year and 5-year performances depict marginal losses of -0.07% and -0.12%, respectively.
USD Coin (USDC), with a market cap of $24.51 billion, faces a short-term dip of -0.33% in the past six months and a minor setback of -0.06% in a year. Its 5-year trend is more bearish, with a decline of -1.00%.
USDP, standing at $446.636 million, displays a positive 6-month performance of +0.02% and a 1-year increase of +0.16%. However, its 5-year performance echoes the cautionary trend of -1.00%.
DAI, valued at $5.348 billion, encounters a marginal decline in the short term (-0.11% in 6 months) and virtually no change over a year (-0.01%). The 5-year trajectory leans slightly negative at -0.61%.
2. Market Share of Stablecoins: What You Should Know
In the fast-evolving world of digital currencies, stablecoins play a pivotal role, boasting a collective market capitalization of $129.189 billion.
2.1. Stablecoin Dominance: Revealing Market Shares
Refer to the diagram below to understand the percentage share of a few prominent stablecoins compared to the total market capitalization of stablecoins.
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Stablecoin
% in Comparison to the Total Market Cap of Stablecoins
USDT
69.39%
BUSD
1.28%
USDC
18.97%
USDP
0.35%
DAI
4.14%
Others
5.87%
Tether (USDT) emerges as the behemoth, commanding an impressive 69.39% slice of the stablecoin market, highlighting its significant influence.
Binance USD (BUSD) follows with 1.28%, while USD Coin (USDC) and DAI secure substantial positions at 18.97% and 4.14% respectively.
USDP contributes 0.35%, and the remaining diverse stablecoins collectively form 5.87%.
This breakdown highlights the nuanced landscape within stablecoins, showcasing Tether’s dominance and the diverse contributions of other key players.
2.1.1. Top Stablecoins by Market Cap in 2023: Tether & USDC vs. Others
Tether (USDT) dominates the stablecoin market in 2023, with nine times higher trading volumes than USDC, the second top player. The dominance of USDT over USDC can be easily explained by its varied usage; USDT is famous for transactions globally, while US forms prefer USDC for storing value.
USDT and USDC collectively control around 88.36% of the market, leaving only 11.54% for other stablecoins. Notably, BUSD and DAI remain the leading contenders among the remaining players.
Binance’s decision to no longer consider BUSD a stablecoin disrupted its previous prominence recently, allowing DAI to step in and assume its position.
2.2. Cryptocurrency Ecosystem: Balancing Act
While stablecoins claim a noteworthy position, the broader cryptocurrency market stands tall with a total capitalization of $1.54 trillion. However, in the delicate balance of digital finance, stablecoins, with a market cap of $0.129 trillion, contribute a vital 8.38%.
Refer to the table below:
Total Market Cap of Cryptocurrencies
Total Market Cap of Stablecoins
$1.54 trillion
$0.129 trillion
The table underscores the growing significance of stablecoins within the broader cryptocurrency ecosystem.
As stablecoins continue to bridge the gap between traditional and digital finance, their role in market dynamics becomes increasingly integral, shaping the future of the decentralized financial landscape.
3. Stablecoins on Crypto Exchanges: An Analysis
Stablecoins, such as USDT and BUSD, on centralized crypto exchanges (CEXs) have experienced significant growth over the past year. The amount of stablecoins on CEXs has risen, making up around 26% ($36 billion) of all circulating stablecoins.
USDT dominates stablecoin trading on CEXs, holding over 75% of the market share. This is primarily because most trading occurs on centralized exchanges, where USDT is a popular trading pair. Additionally, USDT is favored by non-US CEXs, including Binance. As regulatory issues arise with BUSD on Binance, the dominance of USDT in trading volume is likely to grow.
4. 2023 Stablecoin Landscape: Distribution Across Blockchains
The stablecoin market is primarily driven by the Ethereum blockchain, with a 59.9% share, followed by Tron at 26.5%. Together, Ethereum and Tron account for 86.4% of the stablecoin market, highlighting their significant influence in the space.
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4.1. On-Chain Analysis: Ethereum and Stablecoins
Ethereum’s on-chain data reveals that USDC is the preferred stablecoin for decentralized finance (DeFi) and NFT transactions, consistently accounting for over 70% of the on-chain transaction volumes since January 2022.
4.1.1. Ethereum On-Chain Volume of Stablecoins
Refer to the table below for the on-chain volume of stablecoins on Ethereum in January and November 2023:
Stablecoin
January 2023 Volume (billion USD)
November 2023 Volume (billion USD)
Percentage Change
USDT
$134.57
$134.03
-40%
BUSD
$40.66
$2.87
-92.94%
DAI
$20.48
$151.15
+637.40%
USDC
$508.56
$152.73
-69.99%
USDP
$1.67
$0.59
-64.67%
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The on-chain volume of stablecoins on Ethereum in January and November 2023 reveals dynamic trends: USDT remained relatively stable; BUSD experienced a substantial decrease, indicating a potential shift in usage; DAI demonstrated significant growth, suggesting increased adoption; USDC saw a notable decrease, possibly influenced by market dynamics; and USDP experienced a decline, with its volume remaining relatively low.
4.1.2. Share of Custodial Stablecoin Share in Ethereum
Refer to the chart below for the distribution of custodial stablecoin supply on the Ethereum blockchain:
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The chart illustrates the distribution of custodial stablecoin supply on the Ethereum blockchain. The percentage represents the proportion of each stablecoin’s total supply held in custodial wallets. For instance, USDT (Tether) constitutes 54.92% of its supply in custodial wallets, USDC (USD Coin) holds 29.83%, BUSD (Binance USD) has 2.12%, and DAI has 7.2%.
4.2. Tron’s Growing Prominence in the Stablecoin Market
Tron has emerged as a significant player in the stablecoin market, hosting 40% of the 5 million weekly stablecoin users in the first half of 2023.
A study by experts at Brevan Howard Digital reveals that in 2022, stablecoins on various networks reached a staggering $11 trillion in volume. Tron, in particular, experienced significant growth, competing with Ethereum in stablecoin transactions.
The network aims to achieve a massive volume of $3.64 trillion this year.
USDT is the most prominent stablecoin on Tron.
5. Relationship Between Crypto Holders & Stablecoin Ownership: A Random Survey
In a recent survey conducted by Blockchain Research Lab, 75% of the 427 crypto holders surveyed currently own stablecoins, 16% used to own them, and 9% never did.
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Among stablecoin owners, 65% keep 0%-25% of their portfolio in stablecoins, while 20% hold 26%-50%. The percentage decreases with larger holdings, as only 10% own 51%-75% and just 5% have 76%-100% invested in stablecoins.
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This data suggests that most crypto holders prefer to allocate a small portion of their portfolio to stablecoins.
5.1. Most Popular Stablecoins Among Crypto Holders
In the survey of 392 stablecoin holders conducted by Blockchain Research Lab, the most widely owned stablecoins are USDT (80.3%), USDC (50%), and BUSD (50%).
Conversely, DAI is less popular, owned by only 18.5% of respondents. Less mainstream stablecoins have the lowest ownership at 6.5%.
This data highlights the dominance of well-established stablecoins like USDT and USDC in the preferences of crypto holders.
6. Top Stablecoin Trends in 2023: Ones to Watch
Here are the top stablecoin trends in 2023 that one should pay attention to:
– Layer 2 Migration: Stablecoins shifting to Layer 2 solutions, such as Arbitrum and Optimism, signify a crucial move towards enhancing scalability and efficiency, addressing concerns about transaction costs and speed in the crypto ecosystem.
– Corporate Adoption: Banks (NAB) and fintechs (PayPal) deploying stablecoins underscore a significant shift in traditional finance, indicating increased acceptance and integration of stablecoins into mainstream financial services.
– CBDCs Rise: The global exploration and introduction of Central Bank Digital Currencies (CBDCs) highlight a transformative trend, emphasizing the potential role of government-backed stablecoins in reshaping money, payments, and global financial leadership.
– Decentralized Shift: The challenge posed by decentralized stablecoins (GHO, crvUSD) to traditional counterparts signifies a broader shift towards decentralized finance, leveraging innovative strategies to carve a niche in the market.
– Regional Stablecoin Success: The traction gained by Euro Coin (EUROC) showcases the acceptance and utility of regional stablecoins, offering secure and efficient means of transacting within specific currency zones bridging traditional fiat and digital assets in localized contexts.
– U.S. Regulatory Progress: The advancing U.S. Stablecoin Bill reflects the growing need for clear regulatory frameworks, acknowledging the complexities of digital asset regulation and signaling potential industry-wide changes.
7. Stablecoin Regulations
Significant developments have been observed in the area of stablecoin regulations in recent times.
– Global Urgency: Setbacks prompt swift worldwide regulatory actions, reflecting global concern.
– International Standards: The Financial Stability Board and Basel Committee establish global norms for digital assets.
– U.S. Legislative Action: Congress introduced a stablecoin bill, highlighting the significance of U.S. involvement.
– Singapore’s Approach: The Monetary Authority of Singapore collaborates for a comprehensive stablecoin regulatory framework, emphasizing an Asian regulatory perspective.
– BIS Supervision: The Bank of International Settlements works on central bank monitoring, underlining the role of global financial bodies.
8. Are Stablecoins A Safe Store of Value?
Stablecoins, such as Tether and USDC, have faced criticism from the Bank of International Settlements for not being a secure store of value. The BIS found that these coins, which are pegged to traditional currencies, often deviate from their promised value. From 2019 to 2023, fiat-based stablecoins maintained their peg only 94% of the time. Crypto-backed and commodity-backed stablecoins had even lower success rates at 77% and 50%, respectively.
The BIS expressed concern about stablecoin issuers needing to transparently verify their reserves, raising doubts about their ability to honor user redemptions.
In March, USDC experienced a temporary loss in value when its reserve deposit encountered issues with the collapse of Silicon Valley Bank. Similarly, the Terra ecosystem collapsed in May due to the failure of its backing mechanism supporting the stablecoin Terra USD (UST). These incidents highlight the inherent volatility and risk of stablecoins, emphasizing the challenges they face in maintaining a consistent value.
8.1. Depegging Trends in Stablecoins: Proceed with Caution
Large-cap stablecoins, valued over $10 billion, have frequently lost their fixed value against traditional currencies. In 2023, depegging occurred 609 times, raising concerns about their stability, according to a recent report by Moody’s Analytics. Despite efforts to provide a steady anchor in the volatile cryptocurrency world, major stablecoins like USDC and Real USD experienced drastic drops in value due to various economic and coin-specific factors. The report suggests that rising interest rates contribute to these disruptions, emphasizing that even sizable stablecoins are not immune to significant value swings.
9. The Future of Stablecoins
A study by Juniper Research predicts that global stablecoin transactions will soar to over $187 billion by 2028, up from around $53 billion in 2023.
Cross-border transactions using stablecoins are expected to dominate, constituting nearly 73% of global stablecoin payments.
Stablecoins accelerate cross-border processes, enhance transaction traceability, and streamline settlements.
However, their growth is hindered by the need for broader acceptance, which requires the development of new networks.
Central Bank Digital Currencies present competition, but their early stage of development and the expansive cross-border market suggest strong growth potential for stablecoins alongside CBDCs.
Endnote
In conclusion, the stablecoin landscape of 2023 is characterized by diverse market performances and evolving trends. Tether (USDT) asserts stability, while Binance USD (BUSD), USD Coin (USDC), USDP, and DAI navigate subtle shifts. Tether dominates with a 69.39% market share, underlining its influence. The collective market capitalization of stablecoins at $129.189 billion highlights their growing significance within the broader cryptocurrency ecosystem. The future foresees global stablecoin transactions surpassing $187 billion by 2028. Despite challenges such as regulatory dynamics and CBDC competition, stablecoins remain pivotal in bridging the gap between traditional and digital finance.