Jan 2, 2024 - Economy

Stablecoins are ticking up again, slowly

Aggregate stablecoin supply
Data: DefiLlama; Graphic: Rahul Mukherjee/Axios

You have to look very closely, but stablecoin supply has started to gently tick back up since October.

Why it matters: Stablecoins — designed to provide holders with a steady value pegged to other assets like the dollar — are the dry powder of cryptocurrency markets.

  • They are largely made up of the actual cash investors set aside to make bets on digital currencies.

The big picture: Total supply shrank for a year and a half, meaning investors had been trading tokens for bank deposits and using that money elsewhere.

  • Even with the recent uptick, the value of all so-called stables are still way down (around 30%) from their high in early 2022.

Be smart: The main thing people use stablecoins for is trading. It's a stable valued token to retreat to in order to lock in gains from a good trade — or to retreat to when all the charts turn red.

  • That said, on crypto podcasts, I've heard folks who were at Devconnect in Istanbul in November talking about how much tether they saw folks using on the street level in Turkey.
  • Tether is the OG stablecoin, accounting for 70% of all stablecoin supply.
  • Argentina is a similar story. And investigative reporter Zeke Faux saw it in retail outlets in Cambodia as he chased the stablecoins backstory.

The intrigue: Tether has engendered a lot of skepticism, since it still hasn't submitted to a traditional audit.

  • Yes, but: It's held up fine for a long time, and is now doing better than ever.
  • Nothing succeeds like success.

Meanwhile, it is also likely benefitting from the demise of another major stablecoin, binance usd (BUSD).

  • The U.S. Securities and Exchange Commission and the New York Department of Financial Services basically put BUSD to death in February.
  • It's a safe bet that capital moving out from that asset explains a fair bit of tether's growth.

Flashback: Tether had a minor depegging as the Terra blockchain fell apart in 2022, but that was nothing compared to what usd coin (USDC) went through during the regional bank crisis of 2023.

  • USDC's issuer, Circle, had long touted the instrument as superior to tether due to its closer ties to U.S. regulated entities. In fact, that might have been its weakness, in hindsight.

The bottom line: Led by bitcoin price breaking and remaining above $40,000, there's a lot of positive numbers in the blockchain world right now, but stablecoin supply growth has lagged.

  • It has turned a corner. You just have to squint to see it.
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