Stablecoins Grow 15% to $187 Billion in 3-Month
In less than three months in the year 2022, stablecoins, a type of cryptocurrency that relies on a more stable asset as a basis for its value, has recorded 15% growth to $187 billion.
Today, top stablecoin like Tether USDT has a market capitalisation of $81 billion, USD Coin is valued at about $53 billion, Binance USD worth about $17.67 billion, Terra USD $15.93 billion and DAI$9.699 billion, according to Coinmarketcap.
At the end of 2021, the global stablecoin market grew by around 472% to $162 billion, with the majority referenced to US dollars, Fitch Ratings estimates.
The global ratings agency said growth slowed in the second half of 2021, with assets expanding by just 20% in the third quarter and 30% in the fourth quarter compared with a 120% uptick seen in the first quarter and 80% growth in the second quarter of the year.
Even though Tether lost market share and USD Coin gained market share during the year, the market remains concentrated, with the two stablecoins accounting for around 70% of total assets as of end-2021, Fitch added.
It said despite the dominance of the two largest stablecoins, others are growing.
Terra $ was the fifth-largest in terms of market capitalisation at end of September 2021 but grew by 278% over the fourth quarter of 2021, rising to the fourth-largest as of end-2021, with a market capitalisation of $10 billion.
Frax’s market capitalisation also grew significantly in the fourth quarter of 2021, to reach the sixth-largest market capitalisation, at $1.8 billion as of end-2021.
Fitch counted eight stablecoins with a total market capitalisation of over $1 billion at end of the fourth quarter in 2021, compared with four at the beginning of 2021.
Global stablecoins pulled off the rare combination of increased reserve portfolio conservatism and rapid growth in 2021, with increased aggregate allocations to cash and US Treasury securities and a full-year growth rate of around 470%, Fitch Ratings says.
It said the ten largest stablecoins’ aggregate market capitalisation was $160 billion at the end of 2021, far ahead of the $28 billion recorded in 2020.
Fitch noted that stablecoin growth has continued in 2022. Their total market capitalisation of $187 billion as of 18 March 2022 represented an increase of 15% since the beginning of the year.
However, Tether remains the largest stablecoin by market capitalisation, reaching $78 billion by the end of 2021, followed by USDCoin at $42 billion.
It noted that market structure changes, combined with changes to the reserve portfolio allocations of the largest stablecoins, resulted in meaningful improvement in stablecoins’ aggregate risk profile in 2021.
Tether has the highest risk appetite, and its market share fell to around 49% of total stablecoin market capitalisation at end of 2021 from 76% in January of the same year.
Meanwhile, USD Coin’s share increased to 29% from 14% over the same time period. USD Coin holds only cash and US Treasuries in its reserve portfolio, while Tether’s risk and asset type allocation is broader.
However, Tether also increased its allocation to higher credit quality securities in 2021. Together, these resulted in a lower overall risk profile in stablecoin reserve portfolio allocations – at least for those stablecoins that publicly disclose reserve portfolio holdings.
Increased conservatism in the stablecoin reserve portfolio composition has coincided with increased regulatory scrutiny and broader usage for stablecoins. READ: Digital Currency: Understanding Risks, Opportunities of Stablecoins
Initially, primarily an entry route for cryptocurrency purchases, storing proceeds from cryptocurrency trades, and for access to the decentralised finance ecosystem, stablecoins are now used more widely for payments, Fitch said. #Stablecoins Grow 15% to $187 Billion in 3-Month
