Journalist
Posted:
- Last year, transactions worth more than $7 trillion were settled using stablecoins
- The circulating supply of ERC-20 stablecoins has seen a noticeable increase recently
Slowly but surely, stablecoins are emerging as a viable medium of exchange worldwide. According to a recent report by Circle, the publisher of USD Coin [USDC]Last year, transactions worth more than $7 trillion were settled using stablecoins.
Compared to the combined $14 trillion global settlements by payments giants Visa and Mastercard, this is a significant milestone.
Focus on stablecoins again
Unlike some of the other volatile cryptocurrencies, stablecoins remain tightly pegged to the underlying fiat currencies, most notably the US dollar (USD). This unique combination of decentralization and stability in market value has expanded the reach of stablecoins in recent years.
According to AMBCrypto’s research on CryptoQuant, the circulating supply of ERC-20 stablecoins has noticeably increased over the past month.
Source: CryptoQuant
Such increases in market caps for stablecoins act as bullish signals for the broader crypto market. This is because most traders use stablecoins to enter and exit transactions on crypto exchanges.
The market capitalization of stablecoins went into a tailspin after the dramatic collapse of Terra USD [UST] last year. As sentiment in the broader market turned bearish, trading activity fell and with it demand for stablecoins.
However, the bullish force injected over the past two months has put the focus back on these crypto currency derivatives.
Will stablecoins continue to support the bull run?
Preceding the market rally that started from mid-October was Tether [USDT] the supply on the stock exchanges gradually started to increase. In fact, in the period between August 19 and October 16, about 3.54% of supply went to exchanges, AMBCrypto found using Santiment data. This was probably done to buy other cryptocurrencies.
After a drop in supply in November, USDT reserves on the exchanges were back to October levels at the time of writing. If history is any guide, this would portend another burst of buying activity in the coming days.
Source: Santiment
Solana drives the growth of stablecoins
Finally, research by AMBCrypto shows DeFiLlama data, Solana [SOL] saw the highest growth in the supply of stablecoins last week, with more than 8%.
The increase was fueled by a 21% increase in USDC deposits, while USDT offerings remained largely unchanged.