Author: Pedro M. Negron, Medium; Translated by: Deng Tong, Golden Finance

This week, we analyze the growing demand for stablecoins in the current cycle, and USDT reaching its highest market cap to date. We look at the overall market cap of all stablecoins across cycles, their respective market caps, and finally, we take a deep dive into the expanding universe of yield-generating stablecoins.

Network Fees - The sum of all fees spent using a particular blockchain. This tracks consumer willingness and demand to use Bitcoin or Ethereum:

  • Bitcoin fees fall 30% for second week in a row as ETF flows and Ordinals speculation slow

  • Ethereum fees fell 7%, and DEX and NFT trading volumes declined.

Net Exchange Flows — Net inflows minus outflows of a particular cryptoasset into/out of centralized exchanges:

  • Bitcoin has been flowing into CEX for eight consecutive weeks, but it is the smallest net inflow since November;

  • 500 million ETH was withdrawn from CEXs net, with outflows reaching $120 million last month.

Stablecoins in 2024: Growth, Challenges, and Opportunities

Stablecoins act as a bridge between the traditional financial and cryptocurrency sectors, and their role is similar to "cash" in the crypto ecosystem. The growth of the stablecoin market capitalization indicates that funds from traditional finance are pouring into the crypto world, resulting in an increase in the liquidity circulating within the cryptocurrency market. This explains the direct correlation between the bull and bear cycles of the cryptocurrency market and the expansion and contraction of its market capitalization. In a bull market, as more funds flow into the ecosystem, the market capitalization rises. Conversely, during a bear market, funds exit the crypto ecosystem, causing the market capitalization to fall.

Source: ITB Stablecoin Insights

Stablecoins have added $9 billion since October 2023 — Although many tokens hit their lowest market prices in November 2022, the bottoming out of the stablecoin market took longer to materialize.

  • The continued uptrend since the fourth quarter of 2023 further strengthens the likelihood of an upcoming bull cycle.

  • The growth of the stablecoin market has not been consistent across all issuers. Last quarter, the market value of major stablecoins such as BUSD dropped significantly.

USDT achieved a remarkable milestone, reaching an all-time high of $94 billion in market capitalization.

Source: ITB Stablecoin Insights

Net Profit of $2.9 Billion in Q4 2023 – Tether announced a record-breaking net profit in the most recent quarter.

  • Several dynamics have contributed to Tether’s increase in market capitalization and surge in profits.

  • During the last bull run, both major competitors faced significant obstacles: BUSD faced increased U.S. government scrutiny, while USDC grappled with a crisis caused by a regional banking collapse.

  • This situation enables Tether to take advantage of these developments, thereby increasing its influence and facilitating its expansion.

Another area of ​​significant growth is the yield-generating stablecoin space, where TVL has grown rapidly throughout 2023 and now constitutes a larger market share.

$4.3 billion under the RWA category – Rising U.S. interest rates throughout 2023 provided momentum and drove growth in this category.

  • Many believe that the potential market for yield-bearing stablecoins could be as large, or even larger, than the total potential market for current stablecoins.

  • Just as traditional financial investors typically don’t leave cash sitting idle, the same principle should apply to the cryptocurrency space. In this context, the dollar should actively generate yield for investors, rather than for institutions like Tether or Circle to earn it.

  • These emerging stablecoins still need to establish a solid foundation in the DeFi ecosystem to stand on par with giants such as USDT or USDC. This requires developing deep liquidity in decentralized exchanges (DEXs) and integrating into lending protocols.

In 2023, the stablecoin market has undergone significant changes, with BUSD and USDC facing the most prominent challenges, paving the way for USDT's opportunities. In addition, the rise of stablecoins with yields has become a key trend that has the potential to change the future landscape of the market.

#稳定币