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Study Uncovers Surprising Data: 90% Of Stablecoin Transactions Not Driven By Human Users

In a recent report by Bloomberg, it has been revealed that more than 90% of stablecoin transaction volumes do not originate from genuine users, according to a new metric co-developed by Visa.

Stablecoin Market Faces Data Reality

Visa and Allium Labs have created a dashboard designed to filter out transactions initiated by bots and large-scale traders to isolate those made by real individuals. Out of approximately $2.2 trillion in total transactions recorded in April, a mere $149 billion was identified as “organic payments activity” by Visa.

The data challenges the optimistic outlook of stablecoin proponents who believe these tokens can transform the $150 trillion payments industry. 

Fintech giants such as PayPal Inc. and Stripe Inc. have been exploring stablecoins, with Stripe co-founder John Collison expressing bullishness on the tokens due to “technical improvements.” 

Pranav Sood, the executive general manager for EMEA at payments platform Airwallex, commented on the findings: “It says that stablecoins are still in a very nascent moment in their evolution as a payment instrument.” 

Sood emphasized the need to focus on increasing existing payment infrastructure in the short and mid-term while acknowledging the long-term potential of stablecoins.

Accurately tracking crypto activity’s “real” value using blockchain data has always been challenging. Glassnode, a data provider, estimates that the record $3 trillion assigned to digital tokens at the bull market’s peak in 2021 was closer to $875 billion.

Analysts Predict Massive Surge Ahead

According to Bloomberg, the nature of stablecoin transactions often leads to double-counting, depending on the platform users employ for fund transfers. For example, converting $100 of Circle’s USDC stablecoin to PayPal’s PYUSD on the decentralized exchange (DEX) Uniswap would result in $200 of total stablecoin volume being recorded on-chain.

Visa, which processed over $12 trillion the previous year, could suffer if stablecoins gain widespread acceptance as payment. 

Interestingly, despite this troubling data, analysts at Bernstein predicted that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, nearly 18 times their current combined circulation.

While PayPal and Stripe have made strides in adopting stablecoins, Airwallex has observed limited demand for stablecoin-based payment solutions among its customers, primarily due to concerns about “user-friendliness.” 

Sood emphasized the significant barrier of overcoming entrenched payment methods, citing the continued use of checks for 40% to 60% of business payments in the United States.

The Bloomberg report sheds light on the dominance of non-genuine user activity in stablecoin transactions. The study underscores the importance of improving existing payment infrastructure and addressing user-friendly concerns to unlock the long-term potential of stablecoins.

Stablecoin

Featured image from Shutterstock, chart from TradingView.com

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DeFi And Web3 Gaming Dominate Q1: Record Transactions Leave Stablecoins In The Dust, Report

In a recent report published by QuickNode, the first quarter of 2024 showed the dominance of decentralized finance (DeFi) and the notable growth of Web3 gaming in the crypto industry, which outperformed the stablecoin sector in key metrics, indicating investor preference and market sentiment during this period. 

Hopes For Second ‘DeFi Summer’ 

Per the report, DeFi experienced a significant resurgence in Q1’24, fueled by a surge in developer and user activity, particularly on chains like Solana (SOL) and Base. 

This resurgence has sparked growing hopes of a second ‘DeFi Summer,’ as DeFi projects embrace new concepts such as staking, liquid staking, restaking, and liquid restaking, which have been catalysts for its growth. Notably, staking now represents a substantial portion of DeFi’s Total Value Locked (TVL).

While stablecoins remain the top spot for address activity, DeFi surpassed stablecoins in an essential metric: transaction counts. 

DeFi

DeFi emerged as the leader in transactions for Q1’24, averaging nearly 7 million daily transactions. Furthermore, DeFi led in fees spent, gas usage, and the overall number of projects despite comprising only approximately 4% of the total crypto market cap.

The TVL for yield-generating protocols within DeFi witnessed steady growth, climbing from $26.5 billion in Q3’23 to $59.7 billion in Q1’24. According to QuickNode, this rally signifies a return of confidence and liquidity to the DeFi markets as investors seek opportunities for yield generation.

Players Take Control With Web3 Gaming

In parallel, Web3-based gaming has emerged as a significant departure from conventional gaming platforms. By leveraging cryptocurrencies and non-fungible tokens (NFTs), Web3 gaming offers players new and decentralized gaming. 

Players now have the opportunity to actively participate in games and earn rewards, shifting control away from centralized entities within the gaming ecosystem.

The report highlights the growth of Web3 gaming, surpassing stablecoins in transaction volume and achieving the highest year-over-year (YoY) active address growth across all categories, with a 155% increase in active addresses during Q1 ’24. 

This surge in player engagement and participation is evident through the exponential growth of transactions within Web3 gaming, which experienced a staggering 370% YoY increase.

The Appeal Of Stablecoins

Although stablecoins continue to lead in daily active users, representing over 41% of all Web3 user activity, other categories have shown higher quarter-over-quarter (QoQ) activity growth, indicating potential catch-up. 

Tether’s USDT remains the dominant stablecoin, controlling approximately 75% of the market cap. Notably, Circle’s USDC has taken the lead in volume and average transaction size, partly due to Coinbase’s efforts to integrate USDC on its platform and promote its use on its Layer 2 network, Base.

DeFi

In addition, the report notes that stablecoins have proven attractive to both new and experienced users, offering stability and value predictability, especially during periods of market uncertainty.

QuickNode attributes the surge in stablecoin user activity in Q1’24 to several factors, including the approval and listing of spot Bitcoin ETFs in the US, the anticipation of Bitcoin’s next Halving event, the devaluation of fiat currencies, the popularity of low-volatility assets, and the strength of the USD, to which over 90% of stablecoin transactions are anchored.

DeFi

Featured image from Shutterstock, chart from TradingView.com

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Stablecoins Join The Crypto Bull Run With $140B Market Cap, Highest Since 2022

February has been an overall notable month for cryptocurrencies and the crypto industry. We’ve seen Bitcoin and Ether, the two largest cryptocurrencies by market capitalization, reach milestones not seen since the crypto winter started.

The bull run has seemingly started, as many analysts and investors have announced, and it appears to be following a ‘2-year trend’ where the industry is beginning to reclaim the heights lost in 2022. Consequentially, the rally has propelled the overall market cap of the crypto industry.

Stablecoins Remain Stable, But The Market Is Expanding

According to data from DefiLlama, stablecoins have joined the crypto market in the bullish rally, as its market capitalization hit $140 billion for the first time since December 2022.

Stablecoins are cryptocurrencies designed to have value pegged to another currency, like the US dollar, or a commodity, like gold. They account for a large portion of the daily trading volume of cryptocurrencies, as many consider them more useful for everyday transactions.

The slow and steady recovery of the crypto industry has been maturing the bullish sentiment in the community. Fueled by investors’ trust in crypto assets and important developments in the industry, the crypto market seems to be recovering to achieve a performance like that of the previous crypto bull run.

However, stablecoin’s recent market expansion is not only fueled by the positive sentiment. Tether (USDT) sits as the third largest cryptocurrency by market capitalization, with over $98 billion, and it has continued to extend its reach in the last few years.

Just this month, USDT’s market cap increased by $2 billion; in the last year, it has risen by over $28 billion. USDT is also ranked as the first cryptocurrency by trading volume in the previous 24 hours, according to data from CoinMarketCap.

Circle’s USDC, ranked fifth by daily trading volume and seventh by market cap, has also seen impressive growth, with its $2 billion market cap increase showing a recovery this month.

The stablecoin’s market capitalization saw a 1-year slump after dropping from $40 billion in March last year. However, the relisting of its trading pairs on Binance and the recent expansion to international markets has fueled USDC’s ‘resurgence,’ as Coinbase recently called it.

Crypto Market Cap Hits $2T

Today, the total crypto market cap hit $2 trillion as Bitcoin’s price spiked to $57,000, increasing 32.2% monthly and 101.3% in the past year. This milestone has not been reached since April 2022, when the total crypto market cap was at $2.1 trillion.

However, Bitcoin’s parabolic surge is not the only reason behind this achievement, as the altcoin market cap, which includes all cryptocurrencies except for BTC, has grown 29.35% in 30 days.

Accordingly, the market capitalization for altcoins hit $255 billion, representing a 111.6% surge last year. Similarly, this level has not been seen since April of 2022.

The altcoin market has seen green throughout February as interest in cryptocurrencies soared massively, led by the ETFs frenzy that started building at the end of last year and exploded in January.

Crypto, crypto market cap

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Domino Effect On Stablecoins Leads To Reversal Of Growth Trend

The crypto bear market of 2022 has spared no digital asset in the space, and stablecoins have been no different. The assets which have always served as a safe haven for investors when it comes to the high volatility of the crypto market had seen a drawdown coming into the new year. As a result of this, for the first time, these stablecoins are now seeing a reversal of their otherwise bullish growth trend over the last couple of years.

Stablecoins See Market Cap Plummet

Stablecoins had grown tremendously throughout the bull market of 2021. By the end of the year, the year-over-year growth of the stablecoin market cap had actually come out to a total of $151.3 billion. This growth is attributed to the popularity among investors who were holding their funds in stablecoins, either from profits or waiting to buy more cryptocurrencies.

Related Reading | Bitcoin Dominance Dives As Ethereum Takes Up More Space

The top stablecoins had enjoyed most of this growth. Assets such as USDT and USDC saw their market caps grow by double-digits in billions, although they continued to fiercely compete with one another. This competition would, however, come out in the favor of USDC. Most of the support had sprung from the fact that USDC had more regulatory oversight compared to USDT, whose reserves continue to be questioned even to this day.

The year 2022 would prove to not be a good one for USDT too. It had come into the new year with more than $78 billion. But in the first half of the year alone, it has lost more than $12 billion to be sitting at its current market of a little over $66 billion at the time of this writing.

Stablecoin supply drops | Source: Arcane Research

USDC, on the other hand, is enjoying much success even through the bear market. Its market cap has added more than $10 billion this year alone, growing from $42.2 billion to $55.31 billion at the time of this writing. 

The Crash Of UST

A major factor behind the decline in the stablecoin market cap has been the crash of UST. By the beginning of this year, it was the largest and most popular algorithmic stablecoin, which is why the crash shook the market to the extent that it did.

Related Reading | Ethereum Classic (ETC) Reclaims $3 Billion Market Cap, More Upside To Follow?

Since then, the market cap of algorithmic stablecoins has dropped from $13.26 billion to around $3 billion. UST alone accounted for more than 94% of the decline after the crash, wiping off $9.7 billion from the crash. There was the crash of other algorithmic stablecoins such as DEI, but UST’s popularity and size made it the most prominent.

USDT market cap drops to $66B | Source: Market Cap USDT on TradingView.com

This has understandably led to reluctance on the part of crypto investors when it comes to using algorithmic stablecoins. As such, stablecoins such as USDT, USDC, and BUSD continue cot rule the market. However, the total stablecoin supply has been down 35.8% over the last six months. This can be regarded as a good thing, given that an increase in supply can often lead to a decline in value and vice versa.

Featured image from TRT World, charts from Arcane Research and TradingView.com

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