The stablecoin market is experiencing a strong recovery in recent months: the market cap of this sector has finally returned above $140 billion for the first time since December 2022.
In particular, it seems that USDC and USDT are leading the recovery, pushing the upward trend of Bitcoin, Ether, and the rest of the altcoin sector.
It is worth noting how in the last month Circle’s currency has grown more than Tether’s, which has been the undisputed leader of the stablecoin industry in 2023.
Let’s see all the details below.
Stablecoin market cap reaches $140 billion for the first time since the 2022 crash
The first two months of 2024 are proving to be very positive for the sector of cryptographic stablecoins, which has recently surpassed the $140 billion threshold, fueling fomo on Bitcoin and Ethereum.
It is important to underline how these types of coins represent the fuel of the cryptocurrency markets, as they allow for fast and inexpensive exchanges between multiple digital resources, acting as the main tool for “fiat on-ramp“.
Looking at past data, we can see how, from the collapse recorded in 2022 following catastrophic events such as the collapse of the Terra/Luna ecosystem and the bankruptcy of FTX, USD-pegged stablecoins have overall decreased their on-chain presence until mid-October 2023.
From October onwards, their market capitalization has only seen increases, going from $129.5 billion to the current $145.7 billion, reaching a level that had not been touched since December 2022 according to data provided by DeFiLlama and The Block.
Altogether, about 16.2 billion dollars have been added, for an increase of 12 percentage points, of which over 10 billion since the beginning of the year.
USDT, USDC and DAI continue to completely dominate this market, leaving little room for external competitors.
Monitoring the market capitalization of stablecoins is essential if you want to have an overall picture of the flow of capital to and from the crypto sector.
Indeed, when this metric grows, major cryptocurrencies usually increase in value as stablecoins have been used to support their demand.
When instead the capitalization is decreasing, it means that investors are selling their “risky assets”, executing redemptions for fiat currencies.
In this regard, as highlighted by a report from Vetle Lunde, senior analyst at K33 Research:
“Changes in the supply of stablecoins are a thermometer to determine whether money is flowing in or out of the cryptographic ecosystem”
USDC and USDT support the rally of Bitcoin and Ether: Circle’s stablecoin leads this month
In a context of recovery for the overall market cap of the stablecoin industry, it is worth noting the key role of USDC, a currency issued and managed by Circle, and of USDT, issued and managed by Tether.
Indeed, the two currencies alone represent over 90% of the market share in this niche, with DAI closing the list controlling 3%.
In detail, we can observe how the circulating supply (and therefore also the market capitalization) of USDT has recorded a recovery since the beginning of 2023, reaching a new all-time high in August, while all the other stablecoins were experiencing significant outflows.
USDC, on the other hand, one of the most affected by the slaughter of 2022-2023, has started to recover in the last 4 months, adding 16 billion dollars to its valuation.
As pointed out by David Shuttleworth, research partner at Anagram, in the last month alone USDC has increased its market capitalization by 2.5 billion dollars, even surpassing the performance of Tether’s currency.
Here is what he reported in a post on X:
“More liquidity and more users are constantly entering the space, and USDC is gradually gaining market share”
Within 1 month, $USDC circulating supply has increased 9.4% and now stands at $28B, its highest level since June 2023. During this time, the total stablecoin market cap increased by $4.5B. Interestingly USDC was responsible for about 53% of this increase.
More liquidity and… pic.twitter.com/7DiBQxlL5W
— David Alexander II
ETHDenver (@Mega_Fund) February 21, 2024
Many analyses have shown skepticism about the fact that USDC led the latest Bitcoin rally and Ethereum, especially considering the financial progress of Tether, which recently surprised all its stakeholders following the news about Q4 2023 quarterly profits.
In reality, the advancement of Circle’s stablecoin, at the expense of USDT growth, is justified by the recent wave of demand in the crypto market coming from the United States, where spot Bitcoin ETFs have been approved since January.
Indeed, it is important to remember that USDC represents the most widely used dollar-anchored cryptocurrency in the USA, supported by exchanges Coinbase and Bitfinex, while on the other hand USDT is the most used in Asia, Africa, and Latin America, with support from the exchange Binance.
Even the use and context of reference for both coins changes: USDC is more commonly used in DeFi while USDT is used more for off-shore exchanges.
Even from a purely on-chain perspective, the destination of the two resources changes: Tron is the preferred blockchain for USDT, while Ethereum is for USDC.
To give an idea of the substantial difference between the two, we underline how Circle has recently removed its support from Tron citing security issues.
USDC emerges as a protagonist in the last month, in a overall situation polarized by the contender Tether, even managing to mark a strong increase in its market share in the trading volume on CEX.
