Stablecoins take a bite out of traditional finance with payments, forex activity

Stablecoins keep evolving in a landscape of clear leaders and niche products. Recent summary research shows stablecoins are gaining ground as payment tools, but also emulate finance, forex trade and other tradfi use cases. 

Stablecoins are taking more ground in the past few months, growing in several categories that take a share out of traditional finance. The stablecoin supply established itself at $160.5B, spread among leaders like USDT and USDC, but also a wider ecosystem of niche assets. In the year to date, stablecoin supply expanded by 30% and entered new ecosystems, especially Toncoin and Base. 

The past quarter saw Tether (USDT) with the most active development. The most widely used stablecoin also raised its supply to 120.2B, coinciding with the most recent rally of BTC to $69,000. USDC still lags with a slower growth to 34.6B tokens.

Most of the stablecoin liquidity remains locked on Ethereum and TRON. In the past three months, Solana established a slightly higher share of stablecoin activity. Binance Smart Chain (BNB) slowed down its usage of stablecoins, while Binance focused on FDUSD for its centralized trading pairs.

In 2024, a total of 70 stablecoins try to coexist, though some have fragmented markets and low liquidity. According to Artemis, only the top 10 stablecoins have trading volumes above $10M daily. Top liquidity and trading volumes are concentrated in USDT and USDC, but also FDUSD, one of the most centralized stablecoins FDUSD is mostly used on Binance and minted with the exchange’s participation.

One of the trends that emerged in the past three months was trading for EURC tokens, based on the Euro. The launch of an Euro-pegged asset by Circle started a small market that works similar to forex swaps. Several use cases, such as remittances and DEX-based forex swaps, reached all-time peaks in the past three months.

Stablecoins are dollarizing the crypto market

The biggest effect of stablecoins is in displacing other coins and tokens as the main payment and settlement tool. While initially Bitcoin (BTC) and Ethereum (ETH) were used for payments, their volatile price did not make them a suitable and intuitive tool. As a result of payment pathways, addresses with more than 10K stablecoins also expanded to nearly 500K of all wallets. In the past three months, all chains supported more than 22M monthly active addresses.

Stablecoins are also driving the remittances market, especially between the US and Mexico. Over time, the flow of USDC between the US and Mexico increased to over $100M per month. Despite the growing value transferred, stablecoins are often used for small-scale transactions, especially under $100. Artemis notes there is also a steady trend to increase transaction sizes, with a rise in the $100-$1,000 range.

Regional usage also diverged, with payments in Asia expanding the fastest. USDT payments through the TRON network are the main driver of Asian use cases. Remittances and e-commerce, as well as transfers to centralized exchanges drive the trends for Asia. European usage and trends tracks the US market, using mostly dollar-denominated tokens. 

Since 2020, stablecoin on-chain volume expanded rapidly, from 3.3% of all activity up to around 60% in the past few months. During peak periods, stablecoin usage made up more than 70% of on-chain volumes. Stablecoins are used either through self-custodied wallets, or through crypto credit cards like Gnosis Pay or Monerium. Revolut and Paxos are among the widely used onboarding platforms for stablecoins in the past three months.

Stablecoins also expanded their supply on top L2 chains. The total supply peaked at more than $10B for the top 5 L2 chains, but slid back to 8.9B tokens. L2 chains gain stablecoin inflows from Ethereum, and some of the assets flow back during slower periods. Base remains the fastest-growing venue for USDC, though growth has stalled in the past three months. Arbitrum still carries around $4.4B in stablecoins, while Base aims to catch up with $3.4B. 

The L2 chains attract stablecoins for DEX trading and other decentralized activities. However, centralized exchanges are still some of the biggest stablecoin holders. Binance and OKX absorb the biggest inflows, offering multiple pairs against USDT and USDC.