The market cap for stablecoins has been growing this year, which should be a good sign for the entire cryptocurrency market. The group is up by about $3 billion this month and has grown $34 billion, or 26%, this year, according to CryptoQuant. The total value is currently about $163 billion, approaching a 2022 peak of $180 billion – which it reached before the collapse of the TerraUSD stablecoin and the network’s native Luna token. 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 activity in the market. They’re 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, it’s not exactly gaining as a proportion of the total market cap of all cryptocurrencies, JPMorgan says. “While the stablecoin universe has been expanding in dollar terms approaching its previous 2022 peak, its expansion has been largely a reflection of the increase in crypto market cap with little change in the stablecoin market share as [a] percentage of total crypto market cap,” JPMorgan analyst Nikolaos Panigirtzoglou said in a note Thursday. “Indeed … the share of stablecoins vs total crypto market cap is little changed this year.” He highlighted a few reasons for the change. New stablecoin issuers and stablecoins like Ethena’s USDe, which promises a higher yield, have emerged this year while Ripple shifted its focus on its RLUSD stablecoin, following a battle with the Securities and Exchange Commission. Tether’s USDT is responsible for 67% of the total market cap growth so far in 2024, according to CryptoQuant. Circle’s USDC follows with 26% share of the growth in 2024, followed by the USDe, which has grown to a $3 billion market cap this year. Additionally, the MiCA regulation in Europe that took effect in July is helping attract market participants into stablecoins. Some firms that launched euro pegged stablecoins had suspended operations pre-MiCA but have now resurfaced with clearer rules too, he added. And in the U.S., the January approval of U.S. bitcoin ETFs and the price rally that followed gave a boost to stablecoin activity as well. “The large price appreciation of bitcoin and [ether] this year and the result[ing] expansion of crypto market cap has naturally led to an expansion of the stablecoin universe as stablecoins serve as collateral in crypto lending [and] borrowing and other crypto transactions,” Panigirtzoglou said. Also, “stablecoins have played a vital role in facilitating on/off-ramp solutions to investors as crypto markets saw increased interest by investors this year following the launch of spot bitcoin ETFs.” —CNBC’s Michael Bloom contributed reporting.
