Stablecoins: Analyzing the Landscape, Emerging Trends, and Challenges (Part 2)

Ref Finance
5 min readDec 29, 2023


In the midst of the ongoing digital transformation in the financial world, digital currencies have taken center stage. However, cryptocurrencies face a significant hurdle — their inherent volatility. To address this issue, stablecoins have emerged as a promising solution. Stablecoins are digital currencies designed to maintain price stability by pegging their value to another asset, such as a commodity or fiat currency. This report provides a comprehensive overview of stablecoins, including their market dynamics, regulatory environment, and emerging trends.

Market Capitalization Trends

USDT achieved an all-time high of $90.5 billion, while USDC remained stable after a recent increase from its year-to-date low of $23.8 billion. Solana experienced significant growth in stablecoins, especially with USDC inflows nearing $150 million since December’s start. This is anticipated to further boost stablecoin growth within the ecosystem.

Aggregate Market Capitalization of Stablecoins by Blockchain

Ethereum currently dominates the stablecoin market, commanding a 59.9% share, followed by Tron with 26.5%. Ethereum and Tron have both strengthened their positions, while other blockchain networks have witnessed double-digit declines. Solana, in particular, faced a significant drop of 69.1% in stablecoin market capitalization.

Stablecoin Market Share in Relation to the Entire Crypto Market Capitalization

Despite a year-on-year decrease of $1.2 trillion in the overall cryptocurrency market capitalization, stablecoins have increased their dominance by 5.6 percentage points. Stablecoin dominance rose from 7.3% in January 2022 to 12.9% by January 31, 2023. This growth was punctuated by peaks of 17.8%, driven by events such as the emergence of the Terra ecosystem and the fallout from the FTX cryptocurrency exchange.

Trading Volumes of Stablecoins on Centralized Cryptocurrency Exchanges

USDT continues to hold a dominant position in terms of trading volume on centralized cryptocurrency exchanges (CEXs), capturing over 75% of the market share. This can be attributed to its widespread use as a trading pair on centralized exchanges, both within and outside the United States. Even on Binance, one of the largest CEXs, USDT pairs maintain a majority share of trading volume.

Stablecoins on Centralized Cryptocurrency Exchanges and Their Year-on-Year Growth

Stablecoins held on CEXs have grown both in absolute value and percentage terms year-on-year. Despite withdrawals following the FTX collapse, CEXs still hold 26%, equivalent to $36 billion, of all stablecoins in circulation. USDT and BUSD emerge as the two largest stablecoins stored on CEXs, with approximately 90% of BUSD holdings residing on the Binance platform.

Stablecoin Transaction Volumes on the Ethereum Blockchain (On-chain)

On-chain stablecoin transaction volumes significantly differ from trading volumes on CEXs. USDC consistently maintains a share of on-chain transaction volumes exceeding 40%, primarily due to its popularity in the Decentralized Finance (DeFi) and Non-Fungible Token (NFT) communities. In contrast, BUSD has limited adoption outside of the Binance chain, where 90% of its supply is concentrated.

Varieties of Stablecoins

Stablecoins can be categorized into four main types: those backed by commodities, fiat-backed, crypto-backed, and algorithmic stablecoins. Currently, USD-denominated stablecoins dominate the market, comprising 98.9% of the total stablecoin sector. Commodities make up the remaining 1.1%. Other fiat denominations include EUR, SGD, IDR, CNY, and TRY.

Market Dynamics

USDT reached an all-time high of $90.5 billion, while USDC stabilized following a recent increase from its year-to-date low of $23.8 billion. Solana witnessed significant growth in stablecoins, especially with USDC inflows nearing $150 million since December’s commencement. This is expected to further stimulate the growth of stablecoins within the Solana ecosystem.

Emerging Stablecoins

New stablecoins have entered the scene, including aeUSD by Aevo and GYD by Gyroscope. Aevo’s aeUSD is a yield-generating stablecoin that leverages Maker’s Dai Savings Rate, while Gyroscope’s GYD focuses on risk management and reserve backing. Additionally, GHO, crvUSD, and FRAX have continued to innovate.

The Solana Ecosystem

Stablecoin Utilization: Stablecoins, particularly USDC, are increasingly being utilized in the Solana ecosystem for liquidity provision and leverage. Transfers of USDC within the network are on the rise.

Growth in Decentralized Exchanges (DEXs): Stablecoins play a crucial role in driving the growth of decentralized exchanges (DEXs) on the Solana network, facilitating seamless entry and exit for users.

Market Trends

Money Market Dynamics: Money markets like Aave and MarginFi indicate a growing appetite for leverage. Annual percentage yields (APYs) on stablecoins within these markets have been on the rise, reflecting an increasing demand for leverage.

Evolution of Total Value Locked (TVL) for Stablecoins: It is evident that USDC and USDT are returning to levels observed between 2020 and 2022 in terms of market share.

Regulation of Stablecoins

Regulatory efforts concerning stablecoins have gained momentum, especially in the aftermath of significant collapses like Terra/UST and FTX. International entities like the Financial Stability Board (FSB) and individual countries are actively working on establishing regulatory standards and frameworks. The primary objective is to subject stablecoins to consistent and effective regulation. These initiatives encompass licensing requirements, surveillance measures, and potential restrictions on algorithmic stablecoins.

Ownership of Stablecoins as a Percentage of Cryptocurrency Holdings

According to a survey, 75% of cryptocurrency holders currently have stablecoins in their portfolios, with 16% having held them previously. When examining the percentage distribution of stablecoin portfolios, the majority of holders (65%) allocate 0%-25% of their portfolio to stablecoins. Only a small percentage (5%) have the majority of their holdings (76%-100%) in stablecoins.

Ownership of Stablecoins: Prevalent Stablecoins

Among those who own stablecoins, USDT is the most widely held stablecoin, with an 80.3% ownership rate, followed by USDC and BUSD, both with a 50% ownership rate. DAI has a lower ownership rate of 18.5%, while other stablecoins like FRAX, MIM, GUSD, and FUSD have even lower rates of ownership.

In Conclusion

Stablecoins have evolved into a vital component of the cryptocurrency ecosystem, acting as a bridge between the digital and traditional financial realms. While they encounter challenges, including regulatory scrutiny and occasional project setbacks, stablecoins continue to adapt and evolve. The emergence of new models and increasing adoption indicate that stablecoins will remain a prominent feature of the cryptocurrency landscape in the years to come.



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