The crypto market has faced significant challenges in recent years, from market crashes to major events like The Merge. Amid these shifts, stablecoins—cryptocurrencies pegged to fiat currencies or commodities—have emerged as a critical bridge between traditional finance and blockchain technology.
Since 2014, companies like Tether and Circle have helped users enter the crypto market with stablecoins, while decentralized options like DAI use algorithms to maintain their value. But how are stablecoins holding up in 2024 amidst ongoing market volatility?
Here, we explore the latest insights from CoinGecko’s report on stablecoins, examining trends in market cap, transaction volumes, and the performance of various stablecoin models.
1. Stablecoins Reached $161.2 Billion in 2024 but Still Below the 2021 Peak
Fiat-pegged stablecoins saw massive growth during the 2020-2021 bull run, with their market cap surging to $181.7 billion, representing over 3,100% growth. However, the collapse of Terra’s UST led to a sharp decline, stalling the market’s growth until a 35.4% recovery between late 2023 and August 2024, bringing the market value to $161.2 billion.
Despite this recovery, the market has not yet matched its previous all-time high, and Tether (USDT), USD Coin (USDC), and DAI dominate, controlling 94% of the market, with USDT alone holding 70.9%.
2. Commodity-Backed Stablecoins See Growth but Remain Small
While commodity-backed stablecoins have grown since 2020, they remain a niche segment within the broader stablecoin market. As of August 2024, they reached a market cap of $1.3 billion, with Tether Gold and PAX Gold accounting for 78% of this total. However, they still represent only 0.8% of the overall stablecoin market.
3. Stablecoins Hold 8.2% of the Crypto Market
Stablecoins now account for 8.2% of the total crypto market, gaining prominence during market downturns as investors seek safer assets. Their share of the market surged during the rise and fall of Terra’s UST and peaked at 18.4% during the bear market in 2022. This trend highlights stablecoins’ role as a safety net in volatile times.
4. 8.7 Million Stablecoin Holders, Dominated by USDT, USDC, and DAI
As of 2024, there are 8.7 million addresses holding stablecoins, with USDT, USDC, and DAI accounting for 97.1% of all holdings. USDT leads with 5.8 million holders, followed by USDC with 2.2 million. The remaining stablecoins each have fewer than a million holders, reflecting a concentrated market.
5. Stability Challenges Persist
Stablecoins have faced ongoing challenges in maintaining their $1 peg, especially during market turbulence. Established coins like USDT, USDC, and DAI have performed better during volatile periods, but newer or partially algorithmic stablecoins such as USDD, FRAX, and others have struggled to maintain stability. Some, like Iron Finance and Basis Cash, have even collapsed.
Conclusion: Stablecoins in 2024 and Beyond
Stablecoins have become a crucial part of the crypto ecosystem, linking traditional finance to blockchain. However, the dominance of a few key players and the ongoing struggle to maintain stable pegs underscore areas for improvement. As the crypto industry evolves, new stablecoin models may emerge to offer more stability and broaden adoption in 2024 and beyond.
