The market cap of stablecoins has been growing this year, which should be a good sign for the cryptocurrency market as a whole. The group rose by about $3 billion this month and is up $34 billion, or 26%, this year, according to CryptoQuant. The total value is currently around $163 billion, approaching a peak of $180 billion in 2022 — which it reached before the collapse of stablecoin TerraUSD and the network’s native token Luna. Stablecoins are cryptocurrencies whose prices are pegged to an underlying asset — usually the U.S. dollar. Crypto investors watch them closely for evidence of demand, liquidity, and market activity. They are used for trading on centralized and decentralized exchanges, as collateral in decentralized finance (DeFi), and for peer-to-peer payments. However, while their market cap may be growing, they are not exactly gaining as a proportion of the total market cap of all cryptocurrencies, according to JPMorgan. “While the stablecoin universe has grown in dollar terms, approaching its previous peak in 2022, its expansion has largely been a reflection of the increase in cryptocurrency market cap, with little change in stablecoin market share as a percentage of total cryptocurrency market cap,” JPMorgan analyst Nikolaos Panigirtzoglou said in a note on Thursday. “Indeed… the share of stablecoins relative to total cryptocurrency market cap has changed little this year.” He outlined a few reasons for the shift. New stablecoin issuers and stablecoins like Ethena’s USDe, which promises higher yields, have emerged this year, while Ripple has shifted its focus to its RLUSD stablecoin, following a battle with the Securities and Exchange Commission. Tether’s USDT is responsible for 67% of total market cap growth so far in 2024, according to CryptoQuant. Circle’s USDC follows with a 26% share of growth in 2024, followed by USDe, which hit a $3 billion market cap this year. Additionally, Europe’s MiCA regulation, which went into effect in July, is helping attract market participants to stablecoins. Some companies that launched euro-pegged stablecoins had suspended operations before MiCA, but have now resurfaced with clearer rules, he added. And in the U.S., the January approval of U.S. bitcoin ETFs and the subsequent price rally have also boosted stablecoin activity. “The strong price appreciation of bitcoin and ether this year and the resulting expansion in cryptocurrency market capitalization have naturally led to an expansion of the stablecoin universe, as stablecoins serve as collateral in cryptocurrency lending and borrowing and other cryptocurrency transactions,” Panigirtzoglou said. Additionally, “stablecoins have played a critical role in facilitating entry and exit solutions for investors, as cryptocurrency markets have seen increased investor interest this year following the launch of bitcoin spot ETFs.” — CNBC’s Michael Bloom contributed reporting.
