New stablecoins were issued continuously in 2024, adding liquidity and reshaping the market. On a year-to-date basis, the supply of stablecoins added the equivalent of $40B, flowing into centralized exchanges, DeFi, yield protocols, and other investments.
Stablecoins are becoming a key product for transferring value, building liquidity pools, and as a means of crypto payment. In the early days of crypto, coins and tokens were often used directly to pay, due to their relatively stagnant price. With speculation and volatility, stablecoins are coming to the front as a more predictable store of value.
Recent data tracking stablecoins also reveals that the liquidity outflows from 2022 have been almost fully repaired. The supply expansion accelerated in 2024, with a steeper growth rate in the past month. The inflow of stablecoins is generally considered a bullish factor, potentially taking the market out of its sideways drift.
MINTED: ~$40 billion in new stablecoins since Jan '24. pic.twitter.com/FXQQcUp5dq
— Token Terminal (@tokenterminal) August 27, 2024
Most newly issued tokens are denominated in USD, though there may be a slight difference in the dollar value due to tokens tracking other currencies.
According to some charts, the 2021-2022 bull market ended with more than $187B in stablecoins. The new token printing also has the task of offsetting the shrinking supply of Binance USD (BUSD) as the exchange switched to USDC. Additionally, DAI diminished its supply by more than 3B tokens in the past two years.
Other tokens are taking the free niches, with increased token issuance on the Celo blockchain. Celo’s ecosystem has not received significant inflows of stablecoins from Ethereum and has tried to build native liquidity.
In late August, FDUSD also expanded its supply. The relatively new stablecoin is now idle in wallets tagged as belonging to Binance and may enter the market soon as a new source of liquidity. Legacy stablecoins like Gemini Dollar and Binance USD are now less than 1% of the stablecoin supply.
Stablecoin inflows offset token unlocks
Stablecoin inflows offset some of the market sell-offs, and may even neutralize the effect of token unlocks. The value of stablecoin inflows in August surpassed the newly released tokens from treasuries and team allocations. Unlocks were seen as one of the ways to extract liquidity from the market, but in August, there may be excess liquidity chasing other assets.
The other source of outflows are meme tokens, though they are mostly limited to the Solana ecosystem. Meme tokens also often crash and disappear, with no need to hoard stablecoins or build treasuries. This factor will further leave free stablecoins for the last quarter of 2024.
The growth of stablecoins is also tied to the expansion in tokenized US Treasuries. Some of the treasuries back stablecoins and some liquidity is invested in the BUIDL token as a secure store of value.
Stablecoins also serve different profiles, with transactions ranging from whale-sized transfers to micro-payments. In the case of the tokenless Base blockchain, USDC usage shows evidence of retail engagement and even micro transactions.
Stablecoin value transfers increased in the past quarter, while the number of active wallets slightly decreased. There is also a disparity in using stablecoins on different networks, where TRON-based USDT is often used for larger payments.
The number of active wallets and owners varies depending on the type of stablecoin. Tether (USDT) is still a leader with more than 57.3M reported holders and a much smaller user count for all other types of stablecoins, including USDC.
Additional growth comes from niche stablecoins with a focus on one ecosystem. Aave’s GHO was one of the aggressively growing tokens in August, as it targets a supply of 175M in the next few months. GHO grew by nearly 20% in August. PYSD also added 31.5% to its supply in the past month.
Ethena’s USDe fell under 3B tokens, as the protocol shrank its risk exposure. Stablecoins with a crypto collateral are generally safe during a bull market but may suffer during a market downturn. The slide in ETH prices caused a more conservative approach to issuing new USDe, while avoiding contagion to other protocols and DeFi pools.
