Stablecoins Settled as Much Value as Visa in 2022: Analysis

In 2022, stablecoins have emerged as a significant player in the digital payment industry, settling as much value as Visa, according to analysis. This development underscores the growing popularity and acceptance of stablecoins as a reliable and efficient means of conducting transactions. With their stable value and quick settlement times, stablecoins are becoming a preferred choice for many individuals and businesses in the digital economy. As the adoption of stablecoins continues to rise, their impact on the financial landscape is expected to be substantial.

The Rise of Stablecoin Adoption: A Thriving Market in 2022

Stablecoin payment adoption continued to thrive last year despite massive capital outflows from the crypto market at large, according to a new report from European hedge fund manager Brevan Howard. Analysts found that the stablecoin market settled over $11 trillion in value in 2022 and that over 25 million blockchain addresses held over $1 in stablecoins.

In a report co-authored by Venture Co-Head Peter Johnson and quant analyst Sai Nimmagadda, Brevan Howard analyzed the usage of “non-speculative stablecoin usage” across various blockchains and layer 2 networks. The analyzed blockchains included Ethereum, Tron, Binance Smart Chain (BSC), Polygon, Optimism, Arbitrum, Fantom, and Avalanche. The stablecoins under scrutiny were USDT, USDC, BUSD, and TUSD, which are backed by bank deposits, US Treasuries, and other highly liquid cash equivalents.

“The vast majority of non-speculative activity uses fiat-backed stablecoins,” noted the report.

Despite the overall decline in crypto exchange volumes, stablecoin volumes only fell by 11% since December 2021, while weekly stablecoin transactions rose by 25%. In contrast, centralized exchanges (CEX) and decentralized exchanges (DEX) experienced a significant decrease in volumes of 64% and 60% respectively.

The growing adoption of stablecoins is evident from the fact that the total value settled through stablecoins last year approached the figure of $11.6 trillion, similar to the transaction value of card payment giant Visa. This staggering figure overshadowed PayPal’s $1.4 trillion figure, which led PayPal to launch its own stablecoin, PYUSD, with the aim of promoting low-cost merchant payments worldwide.

Stablecoin Users: Small but Significant

The report suggests that the majority of stablecoin users are likely to be small-scale retail users. Around 75% of weekly active stablecoin addresses transact less than $1000 per week, indicating their use by individual users. Moreover, over two-thirds of stablecoins are held outside of exchanges and smart contracts, further highlighting the retail nature of stablecoin ownership.

While Ethereum accounts for approximately 50% of stablecoin volume, it only represents 3% of total transactions. This can be attributed to the network’s higher transaction fees, which render smaller transactions unfeasible. In contrast, Tron and Binance Smart Chain (BSC) account for 75% of stablecoin transactions and 41% of volume.

Tether Dominance

Tether’s USDT remains the dominant player in the stablecoin market, accounting for over half of all stablecoin volume. Not only does USDT make up 69% of stablecoin supply, but it also represents 80% of weekly active addresses and 75% of transactions. Circle’s USDC, which once rivaled USDT in market dominance, suffered a loss of confidence during a brief de-pegging event in March, leading to a decline in its market share.

In recent developments, Tether has cut support for three blockchains, including its very first network, Omni. The decision was made due to the lack of significant stablecoin activity or adoption on these blockchains.

Overall, the remarkable growth of stablecoin adoption in 2022 showcases its increasing prominence in the crypto market. With its stability and increased usage for various transactions, stablecoins are proving to be favored by retail users and are potentially reshaping the future of payments.

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