From the centralized stablecoins represented by $USDT and $USDC, to the over-collateralized stablecoins dominated by $DAI and $FRAX, to the rise and fall of $UST, the stablecoin world is constantly evolving. In this report, we'd like to show the current status and look into the future of stablecoins.
There are three types of stablecoins, reserve-backed, over-collateralized, and algorithmic. Reserve-backed is the most common stablecoin, but they are centralized. Decentralized stablecoins are mostly over-collateralized. Algorithmic stablecoins gradually faded away after the collapse of Terra ($LUNA).
As of March 2023, centralized stablecoins represent 94% of the total market cap, while decentralized stablecoins account for only 6%. Decentralized stablecoins were gaining market share between 2019 and 2022, reaching the ATH at 17% in May 2022, when the collapse of Terra $UST destroyed the market’s confidence in decentralized stablecoins.
$USDT, $USDC, and $BUSD are the major centralized stablecoins. As $BUSD is discontinued as of Feb 13, 2023,$USDT and $USDC will be the remaining centralized stablecoins that matter, out of which $USDT maintains a small lead.
The decentralized stablecoin landscape is similar, given that there are only two big players, but $DAI's #1 spot is untouchable and is 5x bigger than $FRAX.
But $DAI & $FRAX are “wrapped $USDC”. $DAII and $FRAX lost their peg in sync with $USDC during the Silicon Valley Bank crisis because of the majority of their collateral $USDC.
Categorizing stablecoins by their purpose rather than by issuer provides another perspective. Pure stablecoins issuers focus on the minting and burning of stablecoins themselves. On the contrary, Application stablecoins issuers develop crypto applications and complement their primary products by releasing a native stablecoin.
With natural application scenarios, application stablecoins' road to adoption is easier and growth potential is higher, as evidenced by $BUSD and sUSD.
Curve's crvUSD and Aave's $GHO are the two upcoming application stablecoins that will change the industry landscape because each of them has billions of TVL ready to be used as collateral.
However, if we take Ether into consideration, maybe Ether is the ultimate currency that we have been trying to create.
Download the full report to learn more about stablecoins' current status and outlook.
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