- The stablecoin market just surpassed $300 billion.
- It will need to grow faster to hit analyst targets.
- Coinbase forecasts stablecoins will hit $1.2 trillion by the end of 2028.
The stablecoin market has surpassed $300 billion for the first time ever, but it will need to grow at an even faster rate to hit analysts’ lofty targets for the soaring sector.
In August, crypto exchange Coinbase forecast that the market will reach $1.2 trillion by the end of 2028. Standard Chartered puts it at $2 trillion in the same period. And Citi expects it to clear the $4 trillion mark by 2030.
Since the start of the year, the stablecoin market has grown at an average rate of $10 billion new tokens per month.
At that rate, it will take more than five years to reach $1.2 trillion.
Tether leads
Tether’s USDT, the biggest stablecoin with a 58% market share, led the move above $300 billion, adding $2.6 billion new dollar-pegged tokens into circulation this week, according to DefiLlama data.
Circle’s USDC, the second-biggest stablecoin, added $391 million in the same period, while Ethena’s USDe grew by $486 million.
Several smaller stablecoins also experienced significant growth. BlackRock’s USD, the seventh-biggest stablecoin, gained almost $700 million, and PayPal’s PYUSD token increased by $663 million.
The period since the start of the year marks the fastest stablecoin growth since early 2021, when the market swelled some 278% in less than six months.
Accelerated growth
There’s reason to believe stablecoin growth will accelerate.
Crypto-friendly regulations have incentivised institutional players to ramp up their digital asset plans. They’re incorporating stablecoins into their businesses, either by launching dollar-pegged tokens of their own or by incorporating existing ones into their services.
“Another key factor is the growth of onchain trading, DeFi, and remittances, where stablecoins are the preferred settlement unit,” Christian Harris, chief analyst at Investing.co.uk, told DL News.
Then there’s the slew of tailor-made stablecoin blockchains looking to carve out a slice of the digital payments market.
Last month, Tether sister company Bitfinex, launched Plasma, a new network offering zero-fee transfers of USDT. It’s already attracted $8.7 billion in deposits to DeFi protocols, making it the fifth-largest blockchain by that metric.
Stripe is also working with crypto venture firm Paradigm to launch Tempo, its own stablecoin-focused blockchain, while Circle, the USDC issuer, is planning a similar offering called Arc.
If these new networks can slice off even a fraction of the transaction volume conducted through payments giants like Visa, Mastercard, and PayPal, it could equate to billions of dollars of stablecoins entering circulation.
Stablecoin risks
The success of stablecoins comes with risks, however.
Although stablecoins aim to trade at parity with the currency they represent — most commonly the US dollar — they can deviate.
It happened to Circle in 2023 when Silicon Valley Bank, where the USDC issuer kept a significant portion of its reserves, collapsed due to a bank run triggered by concerns over its financial health.
At the time, USDC tokens, which should have been valued at a dollar, briefly traded for $0.87 as investors feared Circle no longer had enough reserves to back all USDC in circulation.
“Any event that results in a depeg of coins and results in consumer harm would result in reputational risk for the stablecoin industry, and puncture this growth,” Nithya Sridharan, digital assets product director at TP ICAP, told DL News.
Crypto market movers
- Bitcoin is up 1.5% over the past 24 hours to trade at $120,557.
- Ethereum is up 2.4% over the past 24 hours, trading at $4,491.
What we’re reading
- Why Tether CEO says new US stablecoin will hit $1tn by 2030 — DL News
- Could a New Internet Enable High-Speed Crypto Transactions? DoubleZero Says Yes — Unchained
- 3 reasons Base network is turning to local currencies for next growth push — DL News
- Uptober vibes mirror last year — Milk Road
- Crypto.com follows Coinbase’s $1bn DeFi-backed lending with Morpho deal — DL News
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
