The booming stablecoin market hit another milestone Wednesday, crossing the $200 billion total market value mark for the first time ever as demand accelerates and adoption expands for the assets.
The asset class as a whole added $10 billion market value in only two weeks since it <a href="https://www.coindesk.com/markets/2024/11/27/stablecoins-hit-record-190-b-market-cap-surpassing-pre-terra-crash-peak-cc-data" target="_blank">surpassed the 2022 bull cycle record</a> of $190 billion, according to CCData and <a href="https://defillama.com/stablecoins" target="_blank">DefiLlama</a>.
Stablecoins are cryptocurrencies designed to hold a steady price, predominantly pegged to the U.S. dollar. They are a key piece of infrastructure for the digital assets space, serving as the main source of liquidity for trading crypto assets on exchanges and move value on blockchain rails.
Demand for stablecoins grew steadily through the past year as crypto markets emerged from a brutal bear market. The growth significantly accelerated following Donald Trump's election victory last month, adding $30 billion supply as investors poured funds into cryptocurrencies in a frenzy.
Tether's USDT, the most popular stablecoin, climbed to a record supply of $139 billion, up 12% in a month, DefiLlama data shows. USDT was recognized as an accepted virtual asset by the Abu Dhabi Global Market (ADGM) earlier this week, and the issuer aims to expand services across the Middle East region.
Circle's USDC, the second-largest in the asset class, also grew 9% to nearly $41 billion market value during the same period. Circle just recently teamed up with Binance, the world's largest crypto exchange by trading volume, to push USDC adoption globally.
It's not just the booming crypto market that drives growth, though.
There's <a href="https://www.coindesk.com/business/2024/09/12/stablecoins-increasingly-used-for-savings-payments-in-emerging-countries-but-crypto-trading-still-leads-report" target="_blank">evidence</a> for increasing stablecoin usage for payments, remittances and savings, especially in developing countries with rapidly depreciating local currency and fragile financial systems. One indication of stablecoin adoption for non-crypto use cases is the rapidly growing number of stablecoin transactions on transfer applications including peer-to-peer payment platforms, Nik Milanovic, partner at the venture capital firm Fintech Fund, pointed out in an <a href="https://x.com/NikMilanovic/status/1866588270311903506" target="_blank">X post</a>.
Tokenized products with stable prices that offer yield to investors are also in vogue. <a href="https://www.coindesk.com/markets/2024/11/19/ethena-sees-1b-inflows-as-crypto-rally-brings-back-double-digit-yields" target="_blank">Ethena's</a> dollar-pegged USDe token, which generates yield by shorting bitcoin and ether perpetuals farming the funding rate, surged over $5 billion, up 90% in a month, per DefiLlama data. Up-and-coming decentralized finance (DeFi) protocol <a href="https://www.coindesk.com/tech/2024/02/28/finance-protocol-usual-introduces-stablecoin-backed-by-real-world-assets" target="_blank">Usual's stablecoin</a> zoomed to $700 million, doubling in size during the same period.
Market cap could double in 2025
The growth will likely continue into the next year, with digital asset manager Bitwise predicting the stablecoin market as reaching $400 billion in 2025. According to a <a href="https://bitwiseinvestments.com/crypto-market-insights/the-year-ahead-10-crypto-predictions-for-2025" target="_blank">Tuesday report</a>, one of the key catalysts could be the U.S. Congress passing long-awaited stablecoin legislation that defines rules for businesses and institutions to issue and interact with tokens.
"Clear answers to big questions—Who regulates them? What are the proper reserve requirements?— will spark massive new interest among issuers, consumers, and businesses," Bitwise analysts wrote. "When that happens, expect some large traditional banks like J.P. Morgan and others to enter the space."
Other growth catalysts include popular fintech applications integrating stablecoins to their services following Paypal's example with its PYUSD stablecoin, and the increasing role of stablecoins in global payments and remittances, the report added.
It's not just Bitwise who came out with bullish projections for stablecoins. Standard Chartered and Zodia Markets <a href="https://www.coindesk.com/markets/2024/11/29/stablecoins-could-grow-to-10-of-u-s-money-supply-standard-chartered-and-zodia-markets" target="_blank">forecasted</a> in a report last month that stablecoins could reach to the equivalent of 10% of U.S. money supply and foreign exchange transactions, up from the current 1%.
