AN OVERVIEW OF TOP USD-PEGGED STABLECOINS
A quick study of stablecoins' footprint using the onchain data (ERC 20 network)
What is a Stablecoin?
“A stablecoin is a class of cryptocurrencies that attempt to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both worlds—the instant processing, security, and privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.” _ By Investopedia
Top Ranked Stablecoins
Based on the market capitalizations of stablecoins, the top four stablecoins in the market are USDT 🟢, USDC 🔵, BUSD 🟠 and DAI 🟡. Here, the UST (TerraUSD) was not included in the research due to the lack of data provided by Glassnode and CryptoQuant.
The historical trend of Market Capitalizations shows the growing demand for stablecoins since July 2020. The significant growth of the minting rate for almost all of the mentioned stablecoins can confirm the rising order for stablecoins in the cryptocurrency market.
The influence of this exponential change in stablecoins’ share in the market has been investigated by many analysts, but Lynda Alden did an excellent study on the topic.
BUSD; A gift to DEX Clients
For the first step of exploration, the Percentage of Total Circulating Supply on All Exchanges is displayed in the following image. Interestingly, except for the BUSD, the other three stablescoins were predominantly kept out of the CEX’s (centralized exchanges) custody. Since Jan 2021, the maximum percentage of supply held on exchange (7D-SMA) for USDC, USDT and DAI were 28.7%, 15.5% and 11.2%. However, since July 2020, more than 85% of these three stablecoins have been off the exchanges. As an exception, almost >95% of all circulating BUSDs were off-chain and utilized largely for attributed activities to the DEX platforms; Trading, DEX Defi and other activities.
DAI & USDC; The backbone of Defi
As further investigation, the Percentage of Total Circulating Supply locked in Smart Contracts is compared below. The average allocation of total supply for DAI and USDC to the smart contracts, in 2021-2022, were close to 40% and 60%. This can confirm the popularity of the DAI and USDC for expanding Defi market. The other interesting outcome of this chart is the spike (highlighted by the green box) in the supply in smart contracts for all stablecoins. This is an indicator for the created demand by the thriving Defi market in 2021.
Transfer Rate; An indicator for significant corrections
The total amount of transfers per second is a useful metric, offered by glassnode, that can be utilized to map the periodic demand in the market for an asset (stablecoins here). As shown in the image below, every time the onchain activity (or demand) increased, the market experienced a major correction. This behaviour can be related to selling pressure from experienced players who tend to exit the market when retailers are buying aggressively. This sell-pressure increases the demand for stablecoins.