By Michael Scott
According to Bernstein’s report, the circulation of stablecoins is reclaiming a peak to underscore their systemic importance.
A recent report by research and brokerage firm Bernstein shows that stablecoin is attaining a systemic essence, with the issuers joining sovereign nations as the largest holders of US treasuries. Today, the stablecoins circulating supply of $180 billion is at its all-time high since the April 2022 peak.
Bernstein observes that blockchain-based stablecoins whose value is pegged to the fiat currency, such as the US dollar, have attained systemic essence.
Bernstein analysts report that the dominant stablecoin issuers, Circle (USDC) and Tether (USDT), are the 18th largest holders of US treasuries. They trail sovereign holders South Korea and Saudi Arabia per the Bernstein note on Thursday, September 19.
Bernstein analysts – Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia – indicated that USDC and USDT held over $125 billion in treasuries. They added that stablecoin businesses are highly profitable, deriving float earnings from the US treasuries, citing the $5.2 billion by Tether by June 2024.
Bernstein report shows the monthly payment volume executed via onchain stablecoin surged by over 300% in the past 12 months to test $1.4 trillion,. The analysts observe that the stablecoins constitute half of the on-chain transaction volumes.
The Thursday note shows that active usage averages 22 million monthly while the wallets holding non-zero balances are at 120 million. Nonetheless, the analysts illustrate that stablecoin usage currently appears decoupled from the crypto and is increasingly held for the non-crypto cases.
Bernstein observes that the stablecoin space has seen new entrants led by the PayPal-Paxos partnership to offer the PYUSD now estimated at $1 billion cap.
Bernstein analysts point to the recent announcement of Ripple’s plans to issue stablecoin targeting cross-border payments. The report highlights the Wednesday hint of UK fintech firm Revolut expanding its scope into the stablecoin segment.
The stablecoin growth derives impetus from the US dollar savings granting access to international users. The stablecoin is propagating the digital dollars beyond the US jurisdiction.
Bernstein indicates that stablecoins are the mainstay currency for crypto trading. Additionally, it enables the users to derive yield on the decentralized finance (DeFi) platforms. Moveover, the stablecoin offers the cheapest cross-border payments averaging $0.01-$0.02 fees per transfer.
Stablecoin Circulation Peaks
The stablecoins have seen their supply hit an all-time high (ATH) by reclaiming levels last seen in the 2022 bear market. The supply rose steadily as the crypto traders cashed out from the volatile investments.
Bernstein reports that stablecoin circulating hovers at nearly $180 billion, with Tether’s USDT the dominant. The USDT has seen its market value hit $120 billion trailed by the USD Coin (UDSC) at $35 billion.
The analysts note that Tether integrates with offshore exchanges and cross-border payments, witnessing accelerated usage in non-US markets. In contrast, Circle USDC rides on the partnership with the US-leading crypto exchange Coinbase.
Bernstein shows that the Ethereum blockchain leads in stablecoin-based transaction volume at 45%. Ethereum is trailed by Tron and Solana, which also have significant transfer volumes.
Hybrid Utilization of Stablecoin?
The recent survey executed on crypto users by Visa alongside Artemis and Castle Island Ventures saw half of respondents hailing from Nigeria, Brazil, India, Turkey, and Indonesia indicate holding stablecoins for crypto trading. The survey had 47% hold stablecoin as US dollar savings, 43% eyeing better conversion rates and 39% eyeing earn yields.
The results affirm that stablecoin utilization for non-crypto uses is growing. The survey revealed increased usage in currency conversion, payments, and executing cross-border transactions.
The survey showed the younger demographics holding their assets largely in stablecoins. 35% of respondents in the 18 – 24 age bracket within the emerging markets allocate over 25% of their portfolio to stablecoins. That surpasses 17% allocated by the 45-54 age bracket.
The survey attributes the popular reason for stablecoins preference over the US dollar bank accounts as the opportunity to earn better yields. Bernstein analysts consider the younger generation to have greater trust in the stablecoin value and be shielded from likely government intervention.