The stablecoin market has seen its total capitalization soar to a record $168 billion after 11 months of consistent growth.
According to data from DeFiLlama, the $168 billion market cap marks a new all-time high, surpassing the previous peak recorded in March 2022.
The figures notably exclude algorithmic stablecoins, which maintain their value through algorithmic mechanisms rather than being backed by external assets like fiat currency or gold.
The market had previously peaked at $167 billion in March 2022 but saw a sharp decline later that year, falling to $135 billion by the year’s end.
New Money is Entering Crypto
Crypto analyst Patrick Scott, known in the industry as “Dynamo DeFi,” noted that the increasing market cap of stablecoins have positive impacts on the crypto market.
“New money is entering crypto,” he wrote on X in response to the market cap milestone.
“And just like that, we’re at a new all-time high. Total stablecoin market cap, excluding algorithmic stables, is now at the highest point ever, surpassing its previous high from early 2022.”
While Scott did not provide specific reasons for the market’s resurgence, he noted that retail participation has been present for at least eight months.
Tether (USDT), the leading stablecoin, has played a pivotal role in this growth. At the start of 2024, USDT had a market cap of $91.69 billion.
Since then, it has experienced steady monthly gains, reaching over $117 billion in market capitalization by August.
Circle’s USD Coin (USDC) has also seen gains throughout the year, reaching a market cap of over $34 billion, its highest point in 2024.
However, this remains significantly lower than its all-time high of $55.8 billion in June 2022.
Despite the market cap growth, stablecoin trading volumes have declined.
A report by CCData revealed an 8.35% drop in trading volumes to $795 billion in July, attributed to reduced activity on centralized exchanges and regulatory concerns in Europe.
The downward trend has persisted into August, with trading volumes currently just above $46 billion, according to CoinMarketCap.
Stablecoin Minting Drives BTC to $65K: Matrixport
Stablecoin minting has been a key factor in driving Bitcoin’s recent surge to $65,000, according to data from Matrixport.
Over the past 2-3 weeks, the consistent creation of stablecoins has provided a significant boost to Bitcoin, acting as a vital fiat on-ramp into the cryptocurrency market.
While Bitcoin Spot ETFs have also seen increased inflows, Matrixport’s analysis suggests that the primary driver behind Bitcoin’s price rise is the steady inflow of stablecoins.
This trend indicates that institutional investors may be behind the current surge, using stablecoins as a mechanism to enter the crypto market.
Notably, the stablecoin market, currently valued at over $140 billion, remains unregulated.
Last month, Senators Cynthia Lummis and Kirsten Gillibrand joined forces to propose a new bill aimed at regulating stablecoins.
Under the proposed legislation, payment stablecoin issuers would be subject to reserve and operational requirements, including the creation of subsidiaries dedicated to issuing stablecoins.
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