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On September 23, USDC Treasury once again minted 50 million USDC on Ethereum, which was the second time Circle minted 50 million USDC since September. Coincidentally, another stablecoin giant Tether also minted 1 billion USDT on Ethereum on September 16.
In addition to the issuance of the two most mainstream stablecoins on the market, PYUSD launched by Web 2 payment giant PayPal is a strong attack on the Solana ecosystem and is bound to the lending protocol Kamino.
According to DeFiLlama data, the overall market value of stablecoins has grown from US$130 billion to the current US$172 billion since 2024, with an annual increase of 32%.
The issuance of additional stablecoins does not dilute their single value like other tokens. Because the collateral behind them allows them to be anchored to one US dollar, it represents an increase in the demand for stablecoins in the crypto market. In theory, it is also regarded as hot money pouring into the market, which is a bullish signal.
Even though the growth of stablecoins this year is obvious to all, the market is still criticized for lack of liquidity and no new funds in this cycle. Has the above theory been proven false? What is the actual correlation with the coin price and the TVL of the overall crypto market? What are the recent strategic moves of the above-mentioned major stablecoin issuers?
Let WOO X Research take you to find out.
USDA
Data situation
USDC had a market share of 32% in March 2022. Later, affected by the bankruptcy of Silicon Valley Bank, its current market share is only 20.6%, and its market value has dropped from US$55 billion to the current US$35 billion.
Although the bankruptcy of Silicon Valley Bank has had a huge impact on USDC, starting in July 2024, USDC will first mint 250 million USDC on Sol; in August, it will continue to mint 2 times of 250 million USDC on Sol, and 2 times of 50 million USDC on Ethereum.
As of September, the frequency of coin minting on Ethereum has increased, with 50 million USDC issued four times within three weeks, totaling 200 million.
Ethereum: 9/23 50 million, 9/10 50 million, 9/9 50 million, 8/30 50 million
SOLANA: 8/8 250 million, 7/20 250 million
Circle's crazy money printing in the past three months has issued about 800 million USDC, which has also caused the market value of USDC to show a slow upward trend in 2024, repairing the scars caused by Silicon Valley Bank.
Recent Developments
In addition to the possible sign of hot money influx mentioned above, the significance of the additional issuance also represents the issuer's optimism about the future of the overall crypto market.
Circle Ventures has invested in 12 projects in total in 2024, 1-2 projects a month, and most of the investment projects are in payment, RWA tracks, and some sporadic infrastructure, such as Huma Funance, the leader of the emerging concept PayFi, which recently raised 38 million, and Centrifuge, the RWA credit market.
Although USDC is a centralized stablecoin, it is an important underlying asset in DeFi. Circle starts from its own businesses such as payment and RWA (stablecoins can be said to be the earliest RWA that brings real assets to the chain). The relevant sectors have the ability to accommodate a large amount of funds. When the market is hot and the overall TVL rises, Circle will be able to make money on both the chain and off the chain, becoming a veritable money-making machine. Circle founder Jeremy also recently said that he is promoting an IPO plan.
Jeremy also stated at the Solana BreakPoint conference that they are exploring the combination of USDC and AI agents to ensure the flexibility and security of infrastructure such as wallets.
From the issuance of USDC, investment payment, RWA, infrastructure track to AI exploration, Circle has been making frequent moves, and related tracks deserve continued attention.
Tether
Data situation
USDT has always been the dominant stablecoin, with a market share of 70%, and the main circulation is on TRON, accounting for nearly 50%. The overall market value is as high as 120 billion US dollars, a growth of 33% since the beginning of this year.
USDT is issued in units of 1 billion. This year, Ethereum and TRON have each issued five times, which is 10 billion US dollars.
Ethereum: 9/16 1 billion, 8/21 1 billion, 8/13 1 billion, 5/21 1 billion, 2/21 1 billion
TRON: 8/20 1 billion, 6/15 1 billion, 5/17 1 billion, 4/4 1 billion, 1/29 1 billion
USDT occupies a large part of the stablecoin market, and its parent company Tether has naturally made a lot of money. The financial report released by Tether in Q2 shows that its net operating profit reached US$1.3 billion, and it made US$5.2 billion in the first half of 2024, a record high.
The main source of revenue is the 0.1% handling fee charged for deposits and redemptions, as well as account verification fees, USDT loan interest income, etc.
With its strong market share, Tether has brought about a network effect and has become a money printing machine in the crypto market regardless of bull or bear markets.
Recent Developments
Compared to Circle, which expands its territory based on its own business, Tether is a slash player.
Recently, on September 8, it announced the acquisition of 9.8% of the shares of Latin American agricultural giant Adecoagro. In July, it announced the development of a decentralized AI model and also invested in Northern Data Group, a cloud GPU operator, with a debt financing of up to US$610 million. In June, it invested in Bitcoin mining company BitDeer and bought US$100 million of BTDR shares.
In April, it announced the establishment of four new business units, including technology, finance, energy (mining) and education, and launched its venture capital arm Tether Evo to explore areas beyond stablecoins.
PY USD
Data situation
Unlike USDT and USDC, PYUSD is not as old as it was launched by PayPal in 2023. It is currently only circulated on Ethereum and Solana, with a circulation ratio of about 1:1. Although Ethereum and Solana are slightly equal in circulation, PYUSD was not launched on Solana until May this year. PYUSD can be regarded as the native stablecoin of Solana. PayPal chose Solana for its excellent settlement speed, transaction fees of less than one cent, and an ecosystem with more than 2,500 developers.
The current market value of PYUSD is US$722 million. It has grown extremely rapidly since the beginning of this year. On the one hand, it has also benefited from the rapid development of Solana this year. Its market value has grown by about 3 times, ranking seventh among all stablecoins.
The recent drop in circulation is attributed to the decline in annualized rewards for PYUSD in various DeFi protocols on Solana.
Originally, depositing PYUSD into the lending agreement Kamino for lending could earn a low-risk return of about 13%, but with the end of the activity, the current return is between 7% and 8%, the willingness to deposit has decreased, and the circulation of PYUSD has therefore decreased. PYUSD in Kamino accounts for 78% of the total circulation on SOL, so the flight of funds from the agreement has a great impact on PYUSD, and it is also one of the risks that PYUSD holders need to consider.
Recent Developments
PayPal launched PYUSD in August last year. It seems to be a latecomer, but in fact, PayPal Ventures has a record of investing in crypto projects as early as 2019. This year, there are 4 investments in three projects, among which the chain risk control company Chaos Labs participated in all three rounds of financing (the seed round was led in 2023)
In addition, it also includes the interest-bearing stablecoin project Ethena and the payment platform Mesh, which were very popular this year. It can be seen that PayPal's development direction is still centered around its own stablecoin and payment business.
Stablecoin Market Cap Correlation with DeFi TVL & Bitcoin Price
By reviewing past experience, we can find that the correlation between the market value of stablecoins and the price of Bitcoin is as follows
In 2021, as the price of Bitcoin rose, the market value of stablecoins also increased, which means that funds are flowing into the cryptocurrency market. Investors may temporarily keep their funds in stablecoins and wait for opportunities to buy Bitcoin or other crypto assets.
In 2022, as the market fell, both the price of Bitcoin and the market value of stablecoins fell, which means that funds are leaving the market and investors are converting stablecoins back to fiat currency or withdrawing funds directly.
From 2023 to 2024, both Bitcoin prices and stablecoin market capitalization showed a gradual upward trend, suggesting that the market has regained interest and funds have flowed into the cryptocurrency market again.
There is a strong positive correlation between Bitcoin price and stablecoin market capitalization. When Bitcoin price rises, stablecoin market capitalization usually increases, indicating an inflow of funds from the market; conversely, when Bitcoin price falls, stablecoin market capitalization also decreases, indicating an outflow of funds from the market.
The trend of DeFi TVL is strongly positively correlated with the market value of stablecoins, and the line charts almost perfectly overlap. With the recent continuous issuance of stablecoins, we can also expect that after the continuous influx of hot money, both Bitcoin and Altcoin will be able to restore liquidity.
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