On-chain value growth, market cap soaring, will 2020 be the year of stablecoin rise?

Since the beginning of this year, the total market value of stablecoins has surged by $3 billion, with the leading stablecoin USDT even surpassing XRP at one point to become the third largest cryptocurrency by market capitalization. Cryptocurrency exchange Coinbase has analyzed this phenomenon and believes that 2020 will be the year of stablecoins.

Stablecoins are able to peg the value of fiat currencies, gold, other digital currencies, and assets traded on exchanges. Currently, there are at least nine mainstream stablecoins globally, such as USDC, USDT, and BUSD. Their characteristics include:

• Open, borderless, and available 24/7 to serve everyone on the internet
• Fast transaction speeds, low fees, and security
• Digitized, programmable features that align perfectly with the internet

Increased Demand for US Dollars

Stablecoins are currently primarily used as a safe haven in the volatile cryptocurrency market and as a medium for value transfer between exchanges. In addition, stablecoins are expanding their scale in global commerce, traditional financial settlements, and as collateral in decentralized finance applications.

Due to the historic volatility experienced in the crypto market on March 12, the stablecoin ecosystem has seen significant growth. As of April 20, the total market value of stablecoins has exceeded a record high of $9 billion, with USDC accounting for approximately $730 million.

According to an article titled "The World's Desperation for Dollars" from The Wall Street Journal in March, global investors are selling assets and incurring high costs to convert them into US dollars. The US Dollar Index (DXY), a representative indicator of demand for the US dollar, has surged to all-time highs.

Note: DXY, also known as the U.S. Dollar Index, is a currency index of the value of the U.S. dollar against six major international currencies (Euro, Yen, Pound, Canadian Dollar, Krona, and Franc).

Stablecoin On-Chain Data Continues to Grow

Stablecoins have made significant progress in the past two years. In March, stablecoins accounted for 40% of the daily on-chain transaction value compared to Bitcoin and Ethereum, which is on a continuous decline.

Compared to traditional banks, stablecoins offer several advantages. Registering for a cryptocurrency wallet may be easier than opening a bank account, as highlighted by international clearing banks:

In principle, stablecoins can facilitate multiple payment methods and serve as a gateway to connect with other financial services, laying the foundation for expanding financial inclusivity.

We compared the daily active addresses, with USDT still dominating the stablecoin market with 50K leading, while Sai, USDC, Dai, and Pax USD have daily active addresses hovering around 3,000, and GUSD (Gemini), HUSD (Huobi), and BUSD (Binance) are less than 100.

Compared to traditional payment systems, stablecoins are becoming increasingly viable in global business operations. For example, JPM Coin, a stablecoin prototype from JPMorgan, can demonstrate the feasibility of stablecoins in traditional financial settlements by enabling "real-time payment transfers between institutional clients."

Simultaneously, the surge in market value and total on-chain transaction value indicate that stablecoins have established use cases as "hedging tools against cryptocurrency volatility and as a medium of exchange between various cryptocurrency exchanges."