In December 2019, I studied stable currencies for the first time. If you had told me that the market capitalization of tokens in this field would exceed $10 billion and the number of users might be close to 100000, I might think you were a little whimsical. By June 2020, however, the seven most important projects had a combined market capitalization of $10.5 billion.
What needs to be explained in this article is:
- You will often see me provide two different charts for Tether and other currencies. This is because Tether is on its own, and the use of logarithmic graphs may not fairly reveal the leading competitors in non-Tether currencies. In this article, except for market capitalization, all the data comes from chain activities on Ethereum. Since the ecosystems of Omni, Tron and Algorand are still in their infancy, I will not consider them for the time being and will study them in depth in the future.
two。. There is a big irony in this industry these days. Among the seven stable currencies with leading market capitalization, only multi-collateral DAI has something to do with “decentralization”. Other currencies are tokens issued with the bank’s reserves. I hope that reading this article will give you a better understanding of the size of the market and take into account the need for currencies issued by non-banks.
I divide the data into market capitalization, number of transactions, trading volume on the chain, number of active wallets, tokens held by the exchange, and so on to get the numbers behind each chain.
USDT accounts for 85% of the market capitalization of stable coins.
The supply of Tether in the stable currency market has increased from $4 billion at the beginning of the year to $9.2 billion today. The change in supply comes from a circulation of $1.6 billion, excluding supply, and a $1.4 billion issue in May. USDC was similar in March and April ($138 million and $148 million), but supply fell in May. Once the Tether is outside, it presents a power distribution. Market shares like USDC, Paxos and BUSD are starting to split equally, which is healthy because users have a choice. However, many of them rely on banks and may be directly sanctioned by the FSB. This is part of the reason why collateral-backed and algorithmic stable currencies will be important in the future.
The main indicators hit a new high.
Monthly trading volume soared from 2.65 million to 6.8 million.
The total trading volume of stable currencies has about tripled in the past five months. Most of the growth comes from USDT. In terms of percentage growth, Paxos led the way with nearly 600% growth in the number of transactions. If the current trend remains the same, we will see a doubling of trading volume on the chain driven by stable currencies in 2020.
The average daily trading volume on the chain has doubled.
In January, the trading volume of stable currencies on the chain was $26 billion. In May, the figure was $49 billion. Most of this growth in dollar terms comes from USDT. In other words-the amount of money Tether trades on the chain has roughly doubled, while its closest peer, (USDC), has grown by only 50 per cent in the past six months. Strong competitors like DAI have declined since the prophecy machine was launched in March and have been slowly recovering. At present, Tether is dominant.
Personal transactions generate new highs.
One way to benchmark stable currencies is by looking at the average transaction size on each network. To do this-I add up the entire trading volume on the chain and divide it by the number of transactions. In the process of doing so, it is clear that although the volume of transactions has doubled, the frequency of transactions is also gradually increasing. This means that the average transaction size decreases over time. Take Tether, for example, which means falling from more than $24000 to $11000 during the year. There has been a similar decline in USDC, which makes me think this trend is not unique to USDT. The higher frequency of individual transactions is a key factor contributing to this trend.
If you don’t look at the changes in active accounts, it makes no sense to consider only the average size. To obtain a measure of this, we measured the number of active receivers per day on each chain. That number peaked on June 7th, when the number of users of these stable currency programs reached 211000. On March 13th, the figure was about 89000. If we take the weekly data as an example, there is an all-time high in the number of active recipients of stable currencies every week after the outbreak. So far, it is approaching 700000.
DAI is becoming more and more dominant.
The next question is whether the growth of stable currencies now comes from Tether. This power distribution is quite intriguing. On the one hand, Tether is the clear dominant leader, with more than 70 per cent of transactions and volumes. However, DAI shows more trading times than some of its centralised peers and has always been ahead of the pack in terms of trading volume. This may be due to its use in DeFi. Exchange-based stable coins are mainly used for over-the-counter trading, with a much higher supply (by market capitalization) and a larger average trading size. However, because people who use DAI usually use it for leveraged position trading or in the DeFi protocol, trading is more frequent. In other words, as a currency, DAI is likely to be used more frequently than its peers on a conventional basis.
The number of individual users is increasing.
One way to measure the nature of stable coin users is to study the amount of money traded through the Internet. We can understand what drives trading in terms of trading volume and number of transactions. My assumption is that because of the nature of the Ethereum charging model, there is no reason for individuals to make hundreds of small transactions all the time. Therefore, the higher the number of small transactions, the higher the number of individuals making these transactions. The largest proportion here is transactions between $100 and $1000. There are more than 750000 transactions in one week. For transactions between $10 and $100, the figure is about 450000.
The giant whale is dominant.
Although the volume of larger transactions has not increased as much as individual entry into the market, it has not decreased either. In fact, for traders with trading volumes of more than 100000 to 1 million, the most recent monthly peak was set in May, at more than 71000. Although these pictures do not make me feel that “institutions are rushing to enter the market”, they do provide some anecdotal evidence that stable currencies are used by those with power as a remittance system.
If you look at the total trading volume on the chain contributed by each trading volume range, you can better show the impact on trading volume. Deals worth more than $1 million account for nearly $21 billion of deals in the chain. In May, the figure was $18 billion. Those deals worth less than $1000 account for only $1 billion of trading volume on the chain. It seems that the giant whale dominates the value transfer of the industry.
Exchanges are still the driving force for large-scale adoption.
Tether is a controversial project, but as I said earlier-it is critical for large-scale adoption. At this point, it is almost “too big to fail”. About 20 per cent of Tether supply is on exchanges, which leads me to believe that most of that supply is generated by end-users through over-the-counter trading. We are seeing some examples of individuals using USDC for payroll management and using DAI to buy NFT. This transition from the first utility of the transaction to the digital currency used to replace the use case will probably be the most important leap forward for a stable currency in the future.
Finally, the article ends with this picture, which shows the stable currencies held by the major exchanges. It is clear that with the exception of Coinbase, most exchanges hold Tether.