In the ever-evolving cryptocurrency landscape, stablecoins have become a major force in the market. According to the latest report From Kaiko, stablecoins now account for a staggering 74% of all cryptocurrency transactions on centralized exchanges (CEXs).
This dominance is fueled by the popularity of Tether (USDT), which has a massive 70% market share. However, the stablecoin market is not without its challenges and risks.
In recent months, stablecoins have experienced notable volatility, raising concerns about their reliability. TrueUSD (TUSD) faced uncertainty when Prime Trust, its custodian, shut down its services. USDT experienced an untying incident due to mysterious selling activity.
Binance USD (BUSD) struggled with increased volatility following Paxos's decision to halt issuance, and USDC plunged during a banking crisis in March. These fluctuations underscore the reliance on centralized stablecoins and the need for greater transparency regarding their reserves.
Stablecoins control 74% of cryptocurrency transactions
Upcoming European regulations seek to address governance issues related to stablecoins, but significant progress is still ahead. Currently, fiat currencies occupy a relatively minor position in the global cryptocurrency markets, comprising only 23% of the market share. In contrast, stablecoins dominate the remaining 74%.
When examining the trading volume on both centralized and decentralized exchanges, it becomes clear that Tether is unrivaled as a leader, with an impressive 70% market share on CEX.
Binance USD (BUSD), once a potential competitor, has faced regulatory challenges, causing its market share to fall from 30% to just 6%. The most notable rise has been witnessed by TrueUSD (TUSD), going from less than 1% to 19% in just three months. Binance's promotion of a zero-fee BTC-TUSD pair fueled its rise.
On decentralized exchanges (DEXs), the picture is different. DAI, the only decentralized top stablecoin, has seen its dominance eroded by USDC and USDT. The change can be attributed to the relative capital efficiency of each stablecoin, as DAI requires excessive collateral to mint tokens, while centralized counterparties do not.
However, the future trajectory of the stablecoin market structure will largely depend on regulatory actions and the willingness of issuers to improve transparency. Unless a coordinated global ban or comprehensive legislation is enacted, the market is likely to retain its current structure, posing both risks and opportunities for participants.
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