The crypto market for stablecoin is growing, but only intermittently

Since the beginning of the year, the crypto stablecoin sector has grown in terms of market capitalization, returning close to the previous high of April 2022.

In the last few weeks, one above all, that of PayPal (PYUSD,) has recorded an incredible increase in its circulating supply within the Solana blockchain.

However, if we compare the evolution of the stablecoin sector to the broader crypto market, we notice that the progress is actually only relative.

Let’s see everything in detail below.

The capitalization of the stablecoin market increases overall

The stablecoin crypto market, especially that segment pegged to the US dollar, has been flexing its muscles since January, showing a strong growth in the “total supply”.

In just 8 months this crypto sector has seen its market capitalization increase by a whopping 38.68 billion dollars.

This boom has overall brought stablecoins back from the crash of 2023, bringing their valuation close to the top of April 2022.

At the moment we count a value of 174 billion dollars approximately, among more than 19  specimens of “stable” cryptocurrencies on a multitude of blockchain networks.

Leading the growth of stablecoin crypto can only be the top seed Tether dollar (USDT), which has jumped by 25 billion dollars since January.

In the last 50 days alone, it has risen by 4 billion dollars in market capitalization, bringing its dominance to 69.53% (data from DefilLama).

At the same time other coins have also seen similar increases in terms of circulating supply, such as Usd Coin (USDC) which has grown by 3.3% in 30 days.

It is worth highlighting in this regard how the introduction of the MiCa regulation in Europe since July has allowed USDC to establish itself as the best compliant stablecoin in the Union, surpassing in comparison even the evolution of USDT.

In the last month, even minor stablecoins like ALUSD by Alchemix and GHO by Aave have seen noteworthy increases. First Digital Dollar (FDUSD) has enjoyed a growth of 17.2%

In the meantime, DAI by Makerdao has slipped by 1%, while USDE by Ethena shows a double-digit percentage downtrend in the wake of the reduction of staking incentives

The successes of PayPal’s stablecoin (PYUSD) on the Solana blockchain

In the midst of the development of the crypto stablecoin market, PYUSD by PayPal is undoubtedly recording the largest performance in percentage points.

Since June 26, it has seen its market capitalization increase by a whopping 569 million dollars, raising the circulating supply by approximately 200%.

Only in the last 20 days, it has reported a capital increase of 256 million dollars, marking its success within the blockchain of Solana.

Its appreciation in this chain has acted as a catalyst for other stablecoins as well, which together have raised their valuation by 1 billion dollars since mid-July.

Even now PYUSD has more circulation on Solana than on Ethereum, which has always been seen as the best blockchain for issuance and management of stablecoin.

Just two days ago it also became the largest crypto stablecoin of the Tron ecosystem.

At the time of writing the article, it capitalizes 843.92 million dollars, establishing itself as the sixth best dollar-pegged currency in the crypto sector.

In front of her only USDT, USDC, DAI, USDe, and FDUSD. Closing the top 10 we find instead USDD, BUIDL, TUSD, and FRAX.

Source: https://defillama.com/stablecoin/paypal-usd

Dominance in decline compared to the broader crypto market

The overall growth of the stablecoin market does not, however, keep pace with the performance of the broader crypto sector, which shows much more positive numbers.

Taking as a reference point the month of November 2022 (bottom of the market with the crash of FTX) we indeed notice how their dominance is decreasing.

From that moment the stablecoin sector has increased in capitalization by just 15%, while the “Total Market Cap” is around +167%.

This demonstrates how a large part of the capital in the cryptocurrency market, especially throughout 2023, has shifted to currency with volatile value.

The crypto investors who had cashed out during the previous bull market of 2021 by accumulating stablecoins, then poured their resources into BTC and altcoins during the past year.

.

It is also worth noting how since November 2022 the dominance of USDT compared to the top 10 cryptocurrencies in the market has been reduced, going from 6.56% to 5.39%.

At the same time, it also went through a golden phase, increasing its capitalization by 20 billion dollars.

This highlights how the sector, although it is progressing nominally, is losing appeal in the face of a broader market.

This does not mean that stablecoin are no longer an interesting technology for financial operations in crypto, but that simply the capital is flowing into other alternatives.

Source: https://www.coingecko.com/en/global-charts

A very interesting on-chain data

In reference to the relative growth of the stablecoin crypto market, we report a very interesting on-chain data from the analysis company CryptoQuant.

Observing the metric of the “Exchange Netflow” related to the stablecoin of the Ethereum ecosystem (ERC-20) we indeed notice a detail that stands out.

Let’s start from the assumption that usually the inflows of stable on the exchanges reflect bull opportunities in the markets while the outflows are the result of profit-taking.

The latest significant outflows occurred between March and April 2024, even surpassing the amounts withdrawn by users during the FTX collapse.

This coincides with the top of the crypto market this year, with Bitcoin marking a new all-time high at 74,000 dollars.

What causes a stir is that during the last price crash there were no particularly significant outflows!

Although the amount of capital evaporated from the speculation of the crypto market has been significantly high, there have been no major withdrawals of stablecoins from the exchanges.

This probably means that the whale are holding stable on centralized markets waiting to make further purchases.

Source: https://cryptoquant.com/asset/stablecoin/chart/exchange-flows/exchange-netflow-total?exchange=all_exchange&window=DAY&sma=0&ema=0&priceScale=log&metricScale=linear&chartStyle=column