BUSD Grows Over 10x This Year, Captures 10% of Stablecoin Market Share with USDT & USDC in the Lead
Stablecoins continue to grow as crypto space gets increasingly institutionalized and crypto investors seek the safety of fiat-backed crypto in the aftermath of market crashes, while the former BoE governor says privately issued stablecoins “must be overseen” by a central bank.
The market cap of stablecoins continues to grow, breaching $110 billion to make up just under 8% of the total cryptocurrency market cap. This year, so far, the stablecoin market cap has increased 3.7x.
Among stablecoins, USDT dominates with a $62.5 billion outstanding supply and a 58.56% market share. However, USDC is not far behind at a $25.8 billion supply and a 23.7% market share.
Leading cryptocurrency exchange Binance’s BUSD is also reaching an $11 billion market cap, up from just $986 million at the beginning of this year, accounting for 10% of the market share.
BUSD is also creeping up in the overall market cap, now at 11th spot, with USDT at 3rd place and USDC 8th place.
Even Algo-stables such as Fei, TerraUSD, Liquidity, and Frax have become a sizable category, comprising 8% of the total stablecoin market cap.
$BUSD (binance's stablecoin) quietly creeping up in overall marketcap (#11) + stablecoin marketshare as well
— BIG DOG (@MoonOverlord) July 7, 2021
Running To The Safety Of Stablecoins
Stablecoins’ continued growth in the current down market makes sense given that crypto space is getting institutionalized, and in the futures market, stablecoins (USDT) are increasingly used and preferred as collateral, unlike the coin itself.
Additionally, crypto investors tend to flood into them in the aftermath of market crashes, as evident in the combined market share of USDT and USDC reaching 7% as a percentage of total crypto market cap, up from 3%.
The majority of these stablecoins’ supply, over 66%, is issued on the Ethereum blockchain. When it comes to protocols, lending protocol Aave has nearly $7 billion worth of stables which is launching Aave Pro this month for financial institutions. Compound Finance is also offering institutions fixed rates on USD, while crypto exchange Coinbase is offering a fixed interest rate on USDC.
DEX Curve is a stablecoin decentralized index capturing $3 billion in stables, while yield aggregator Yearn has more than $1 billion of stablecoins on its platform.
Amidst stablecoin’s growing popularity, they have also come under the scrutiny of regulators around the world.
Last week, former Bank of England governor Mark Carney said privately issued stablecoin such as Facebook’s Diem and Tether “must be overseen” by a central bank for them to be effectively regulated. Speaking at an annual lecture for the Bank of International Settlements (BIS), Carney said,
“In baseball, it’s three strikes and you’re out. In cricket, it’s only the equivalent of one, and for systemic payment systems, one is too many.”
“If that means, as a must, a very rigorous oversight and rules for private stablecoins, what would then differentiate them from CBDCs?”
According to him, the value will be exchanged through CBDCs, and “any native cryptocurrencies of sufficient scale will be dominated by CBDCs, or very tightly regulated stablecoins for reasons of systemic stability.”
Fitch Ratings also joined in saying the rapid growth in the issuance of stablecoins and sudden mass redemption of them (USDT) could have implications for the short-term credit markets, and authorities are unlikely to intervene to save them in the event of a disruptive event, partly owing to moral hazard.
This could then increase the pressure for tighter regulation of the nascent sector, said the rating agency.