Despite established stablecoins showing improved stability to keep pegged to one US dollar, tough times still affect this dynamic.
Key Takeaways
- Established stablecoins like USDT, USDC, and DAI show improved peg stability during market volatility.
- The total market cap of top 10 fiat-pegged stablecoins grew 35.4% from November 2023 to August 2024.
Stablecoins continue to face challenges in maintaining their peg during volatile market periods, according to a recent report by CoinGecko. The March 2023 banking crisis, which raised concerns about deposits at Silvergate and Signature Bank, highlighted this issue.
Yet, despite past struggles, established stablecoins like Tether USD (USDT), USD Coin (USDC), and DAI have shown improved ability to maintain their $1 peg. However, newer and partially algorithmic stablecoins such as USDD and FRAX remain more volatile, relying on market arbitrage for peg retention.
Raising dominance during tough times
Although the dollar peg might be shaken during bearish periods, stablecoin dominance typically increases during these conditions.
As of August 1, 2024, stablecoins accounted for 8.2% of the total crypto market cap, up from approximately 2% in early 2020. This means they managed to grow even during the deep bear market registered between 2022 and 2023.
The total market cap of the top 10 fiat-pegged stablecoins has seen significant growth. From January 2020 to March 2022, it increased by 3,121.7%, rising from $5 billion to $181.7 billion.
Notably, the total market cap of stablecoins managed to recover from the Terra USD (UST) collapse registered in May 2022, as it has risen from $119.1 billion in November 2023 to $161.2 billion as of August 2024.
Strong USDT dominance
USDT, USDC, and DAI dominate the stablecoin market, comprising 94% of the total market cap. USDT has solidified its position with a 70.3% market share, while USDC’s share has declined since the March 2023 US banking crisis.
The top 10 stablecoins have 8.7 million holders, with USDT, USDC, and DAI accounting for 97.1% of them. USDT leads with over 5.8 million wallets, more than double its closest competitor, USDC.
Additionally, commodity-backed stablecoins have also gained traction, reaching a market cap of $1.3 billion as of August 1, 2024. Tether Gold (XAUT) and PAX Gold (PAXG) make up 78% of this segment, which has grown 212x since 2020.
However, commodity-backed stablecoins still only account for 0.8% of their fiat-backed pairs in market cap.
