Total Stablecoin Supply Adds $20 Billion in Just Two Months; Transacted Volume On Track to Exceed $1 Trillion in 1Q21

Stablecoins have become a big deal with their total market supply ready to hit 55 billion, growing from about 30 billion at the start of the year, as demand for them continues to rise as they look for stable means of storing and transferring value.

Among all the stablecoins, USDT is the dominant one with a market cap of about $37.6 billion. However, the supply dominance of Tether has fallen to 70%, its lowest ever, due to the growth Coinbase and Circle’s USDC has been seeing.

USDC is simply going parabolic, much like all the other metrics in the market. Total USDC supply surpassed 9 billion on Feb. 28, less than a week after breaching the $6 billion mark.

These leading stablecoins, however, are centralized and bear the risk of censorship, seizure, and counterparty risk. As for decentralized stablecoins, for now, they are often capital inefficient, governance heavy, difficult to scale, and in the case of algorithmic stablecoins – unstable.

Stablecoins have been on the rise ever since 2020, and they continue that trend in 2021, epically as DeFi gets more and more popular and gets increasing usage.

Besides being used extensively in DeFi as collateral and for other purposes, they are used as dry powder — money on the sidelines amidst the market volatility. Moreover, they are increasingly used to move around the world and for foreign aid.

“As the use cases for stablecoins continue to grow, supply will likely keep on rising,” noted Coin Metrics.

Stablecoin active addresses have also surged along with its supply, pointing to high activity. Throughout most of February, stablecoins have averaged over 300K unique active addresses per day, which topped at 400k, a new peak on February 18th.

In the past 12 months, stablecoins have also transacted $1.5 trillion in volume and are on track to exceed $1 trillion in Q1 2021 alone.

But this is just the beginning, as these fiat-backed cryptos have a multi-trillion dollar addressable market. For instance, the US dollar accounts for about 55% of the world’s international transactions, savings, and borrowing.

There is large structural global demand for USD that too outside the US financial system. And stablecoins are particularly positioned to service this offshore dollar demand by “providing individuals and businesses globally with easy access to dollars due to stablecoins.” Ryan Watkins of Messari said,

This offshore dollar market, dollar deposits held outside the US, is estimated to be over $57 trillion dollars, as per BIS data. “It may sound crazy, but this is the market stablecoins are beginning to eat into.”