ReportWire

Tag: Stablecoins

  • Binance Research Report Reveals 110% Surge in Crypto Market Cap YTD

    Binance Research Report Reveals 110% Surge in Crypto Market Cap YTD

    A recent report from Binance Research reveals a remarkable surge in the total cryptocurrency market capitalization, which has climbed by about 110% year-to-date, adding over $870 billion in capital, with a notable 55% increase observed in Q4 alone.

    This growth follows a period of stagnation after the 2021 crypto highs, marking a potential shift in market dynamics.

    Stablecoins and Bitcoin NFTs Fuel Crypto Market Revival

    A significant finding highlighted in the report is the first positive shift in the quarterly net change of the supply of the top five stablecoins since Q1 2022. This indicates a growing interest and influx of capital into cryptocurrencies.

    Moreover, there has been a notable resurgence in trade volumes of NFTs, particularly in Bitcoin NFTs, breaking the previous year-long downtrend. NFT trade volume resurgence reflects a renewed market sentiment and a revival in speculation.

    The study also highlights a surge in fees generated by leading crypto projects in November, suggesting the maturation of these platforms into revenue-generating businesses, with Ethereum leading in fee generation.

    Among the emerging trends, the report identifies the comeback of the DeFi sector, with a 25% increase in total value locked since the year’s start and Ethereum maintaining its dominance.

    Bitcoin’s market cap increased by 162% in 2023, with factors like the anticipated U.S. spot Bitcoin ETF and the upcoming Bitcoin halving driving this growth. Alternative Layer-1 platforms, particularly Solana and Toncoin, have shown promising performance, highlighting the growing diversity in the blockchain ecosystem.

    SocialFi, ZK Tech, and RWA Tokenization Gain Momentum

    The report acknowledges the rise of SocialFi, led by platforms like friend.tech, marking a new development in integrating social media and blockchain, attracting significant attention and fees.

    It also points to the increasing tokenization of real-world assets (RWAs), with MakerDAO at the forefront, and Chainlink’s Cross-Chain Interoperability Protocol (CCIP), aiming to bridge traditional finance and crypto for further RWA integration.

    Zero-knowledge technology is also gaining momentum, which is evident through recent launches of ZK-rollups and heightened efforts and discourse on ZK co-processors.

    The report concludes by mentioning macroeconomic factors, suggesting that lowering global interest rates could redirect investments towards high-growth sectors like cryptocurrency, potentially boosting the market.

    The indicators and trends outlined by Binance Research paint an optimistic picture for the crypto market, with a mix of technological advancements, regulatory developments, and macroeconomic factors suggesting potential for continued growth and innovation in the coming months. However, it’s too early to declare a bull market definitively.

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    Wayne Jones

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  • Tether's (USDT) Market Cap Peaks at $90 Billion Amid Renewed Confidence

    Tether's (USDT) Market Cap Peaks at $90 Billion Amid Renewed Confidence

    Tether (USDT) – the largest stablecoin globally, has experienced continuous growth in its market capitalization, reaching an all-time high of $90 billion on December 6th before retreating слигхтлъ to $89.9 billion. This surge suggests a renewed trust in the crypto market despite facing regulatory hostilities.

    Over the last month, the market cap has increased by around 6%, bringing the year-to-date growth to over 35% from a modest $66.24 billion, demonstrating its capacity to navigate market volatility and restore investor faith.

    The growth also signified an improvement in liquidity in the market with an influx of additional capital into the ecosystem.

    State of Stablecoins

    Following major incidents such as the Luna collapse in June 2022 and the Silicon Valley Bank (SVB) crisis in March, there was a significant decrease in the overall supply of stablecoins, signaling a lack of confidence in the market.

    However, from October 2023 onwards, there has been a consistent increase in the total stablecoin supply, indicating a positive shift. This upward trajectory serves as an early indicator of enhanced on-chain liquidity, suggesting a scenario where more capital is ready for deployment, according to the latest CoinMetrics report.

    USDC – the widely used stablecoin in decentralized finance (DeFi) applications – experienced a notable portion of its supply residing in smart contracts, reaching a peak of over $20 billion in March 2022. However, throughout the year, this figure slashed by half from its peak of $14 billion in March to $7 billion by December 2023.

    In contrast, Tether (on Ethereum), primarily held in externally owned accounts (EOAs), has demonstrated a different trajectory. Its involvement in smart contracts has expanded, increasing from $4 billion at the beginning of the year to surpass $6 billion.

    The report also found that the number of addresses holding greater than $100k USDC has declined to 13k addresses, while those for USDT on Ethereum remain relatively stable.

    But USDT on the Tron network has a completely different story. Tether on Tron witnessed a steady growth in adoption, with nearly 40k addresses holding greater than $100k. Such a trend can be attributed to its cheaper transaction fees and potentially increasing use in developing economies across parts of Latin America, Africa, and Asia.

    Spot Trading Volume

    There has been a significant uptick in stablecoin spot trading volumes, highlighting their utility as a quote asset on both centralized and decentralized platforms. CoinMetrics found that USDT continues to dominate the trusted spot volumes, reaching $18.8 billion on November 15th.

    These volumes rank second only to those observed during significant market events such as the Terra, FTX, and SVB collapse.

    USDC volumes have also recently surged, reaching $2.5 billion in November – a record high in USDC trading volume.

    In contrast, the volumes for other stablecoins have declined, primarily due to the reduction in BUSD volumes, which Binance announced it would cease supporting this month.

    Overall, the upward trend in volume signifies a growing interest among traders and investors in gaining exposure to crypto assets with the potential for appreciation, particularly as the broader crypto markets are experiencing an upswing.

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    Chayanika Deka

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  • Fed’s Caution On Stablecoins Risks Countered With Recognition Of Innovation Potential

    Fed’s Caution On Stablecoins Risks Countered With Recognition Of Innovation Potential

    The use of stablecoins has recently come under increased scrutiny from the United States central bank. In a move to strengthen its supervision of banks involved in stablecoin activity, the Federal Reserve announced new guardrails in August.

    This heightened attention on stablecoins is driven by concerns that private entities are essentially creating private money, which could pose risks to the stability of the financial system. 

    Michael Barr, vice chair of the Federal Reserve for Supervision, has called for a robust federal framework to regulate stablecoins. He emphasized the importance of well-regulating private money, especially those stablecoins that are linked to fiat currencies, such as the US dollar, as they inherently rely on the trust of the central bank.

    Barr’s Assertion: Stablecoins Borrow The Trust Of The Fed

    During a recent speech at DC Fintech Week, Barr reiterated his stance on stablecoins, stating that “private money needs to be well regulated.” He explained that when an asset, like a stablecoin, is used as a means of payment and a store of value, it effectively borrows the trust of the central bank. 

    In this context, the Federal Reserve is deeply concerned about ensuring that any stablecoin offerings operate within an appropriate federal prudential oversight framework. This oversight is critical to prevent these stablecoins from posing threats to financial stability or undermining the integrity of the payments system.

    As of today, the market cap of cryptocurrencies stood at $1.308 trillion. Chart: TradingView.com

    Challenges Surrounding Stablecoin Regulation

    In the realm of stablecoin regulation, lawmakers within the House Financial Services Committee made strides over the summer with the advancement of a stablecoin bill. However, this legislative progress was not without its challenges. One of the key sticking points revolved around a provision that would potentially allow state regulators to approve stablecoin issuance without requiring the Fed’s input.

    Representative Maxine Waters of California expressed strong disagreement with this provision. She argued that state regulators should not have the authority to make such decisions independently. While this disagreement temporarily halted the legislative process, Waters recently indicated her expectation that talks on the stablecoin bill would resume.

    Congressional Role In Stablecoin Framework

    Addressing the ongoing debate, Barr suggested that it would be more advantageous for Congress to play a central role in shaping the regulatory framework for stablecoins. This approach would ensure a comprehensive and consistent oversight framework that aligns with the Federal Reserve’s goals of safeguarding financial stability and payment system integrity.

    The Federal Reserve’s increasing focus on stablecoins reflects growing concerns about the potential impact of private digital currencies on the US financial system.

    As discussions and debates continue, the path to regulating stablecoins is complex and multifaceted, with a need for careful balance between government oversight and private innovation.

    The future of stablecoin regulation in the United States remains a topic of critical importance, as the financial landscape continues to evolve in the digital age.

    Featured image from Shutterstock

    Christian Encila

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  • US Remains Largest Crypto Market But Stablecoin Activity Shifts Away

    US Remains Largest Crypto Market But Stablecoin Activity Shifts Away

    The United States is the world’s largest cryptocurrency market, accounting for 24.4% of global transaction activity, according to a recent report by Chainalysis.

    The report, released on October 23, revealed that there was an estimated $1.2 trillion in value received on-chain between July 2022 and June 2023 in the U.S.

    Moreover, institutional activity makes up 76.9% of North America’s crypto transaction volume, and activity is split between centralized exchanges and DeFi, it added. 

    Stablecoins Shift Away

    However, it also reported that crypto activity is falling due to the ongoing ‘war on crypto’ by financial regulators in the wake of last year’s high-profile collapses. 

    “On-chain data suggests that North American crypto activity has fallen over the last year, following negative developments such as the blowup of FTX.”

    Activity has fallen further this year following the collapses of a number of major banks in the U.S. in March.

    Moreover, stablecoin activity is also shifting away from America. “We’ve also observed a relative decline in North America’s stablecoin usage, compared to other digital assets, beginning around February 2023,” the report noted.

    Confidence in stablecoins such as Circle’s USDC was rattled following the collapse of Silicon Valley Bank, where the firm had massive exposure.

    The majority of stablecoin inflows to the 50 biggest crypto services have shifted from U.S. licensed services to non-U.S. licensed services, it said. 

    “Though U.S. entities originally helped legitimize and seed the stablecoin market, more crypto users are pursuing stablecoin-related activity with trading platforms and issuers headquartered abroad.”

    Additionally, the shift has reduced regulatory oversight of dollar-pegged stablecoins in the U.S. 

    Congress has dragged its feet in regulating and legitimizing stablecoins despite a number of bills proposed by pro-crypto politicians. 

    In summary, crypto and stablecoin regulation will play an important role in reversing the trend of declines in North America.

    DeFi Adoption Still Grows

    Despite the aforementioned regulatory challenges, DeFi adoption is still on the rise within the North American region, as reported earlier this week.

    The overall on-chain value that changed hands in the period between July 2022 and June 2023 is estimated to be around $1.2 trillion, which is just over 24% of the global number.

    At the same time, DeFi usage in the North American region has continued to increase by raw transaction volume, especially for protocols with highly speculative trading.

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    Martin Young

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  • Stablecoins pose existential threat to policy sovereignty, CBDC preferable: RBI

    Stablecoins pose existential threat to policy sovereignty, CBDC preferable: RBI

    While stablecoins linked to underlying currencies are more feasible than private assets and offer an alternative to CBDC (central bank digital currency), they are only beneficial to certain economies to which they are linked, according to RBI Deputy Governor T Rabi Sankar.

    Stablecoins provide an international benefit, especially to linked economies such as US and Europe but are not necessarily good for countries like India owing to the transfer of seigniorage to private issuers to the extent that it replaces the use of the rupee in the economy.

    Also read: CBDC: A calibrated approach needed

    “That is one aspect we have to take into account. What happens to India’s capital regulations or monetary policy. If large stablecoins are linked to some other currency, there is a risk of dollarisation,” Sankar said at an event organised by IBA.

    “We have to be very careful about allowing these sorts of instruments. Stablecoins can provide some of this but they are only useful to a few countries that are linked. From the past experience in other countries, it is an existential threat to policy sovereignty,” he said.

    A stable solution then is for every country to have its own CBDC and for countries to then create a mechanism where the CBDCs can interface and transact with each other, he said, adding that while CBDC is being used a policy instrument in several jurisdictions, the RBI has no plan to do so.

    Cross-border transactions

    On the use cases of CBDC, Sankar said the same is required for global transactions if nothing else, adding that cross-border transactions are the biggest emerging use case at the moment.

    “The current global payment system… the corresponding banking arrangement that exists has features that add inefficiencies,” he said.

    This is because there are only a few entities that all transactions are routed through, which translates to higher costs for even small value cross-border remittances, and thus the system needs to be diversified.

    “As per World Bank estimates, a cross-border small value transaction, remittance transaction is at 6 per cent. That’s extremely high.”

    Urging banks to relook their remittance structure, Sankar said that given the technology and innovation available today, banks can no longer justify the high foreign exchange margins and remittance charges.

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  • The Path To A Bitcoin Economy: Decentralized Bitcoin-Backed Credit

    The Path To A Bitcoin Economy: Decentralized Bitcoin-Backed Credit

    This is an opinion editorial by David Seroy, Founder and President of Old North Capital Fund.

    It is the author’s opinion that credit-based, bitcoin-backed dollars will act as the bridge connecting bitcoin, dollars, the Lightning Network, validity roll-ups, and elements of free banking in a hyperbitcoinized world.

    Bitcoin and the dollar are symbiotic. Like yin and yang, bitcoin and dollars provide balance. On the one hand, bitcoin acts as a counterparty-free, decentralized, scarce, digital bearer asset to hedge against excessive credit creation. On the other hand, the free market has an insatiable desire for issuing credit-based dollars which fill the role of both a ‘stable” unit of account and an elastic monetary layer.

    David Seroy

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