Tether USDT Dominates Stablecoin Market with $120 Billion Market Cap Amid Growing Systemic Importance

• The rise of blockchain-based stablecoins pegged to fiat currencies is becoming a significant development in the financial landscape.
• Stablecoin issuers such as Tether (USDT) and Circle (USDC) have now become major holders of U.S. treasuries, indicating their systemic importance.
• According to analysts at Bernstein, stablecoin companies have amassed more than $125 billion in U.S. treasuries, placing them among the top 18 holders globally.

An in-depth analysis on how stablecoins like USDT and USDC are shaping the financial world, including their systemic importance and emerging use cases beyond cryptocurrencies.

Stablecoins Surge in Systemic Importance

Blockchain-based stablecoins, particularly those pegged to fiat currencies such as the U.S. dollar, are emerging as key players in the financial ecosystem. Their importance is underlined by the substantial U.S. treasuries held by issuers like Tether (USDT) and Circle (USDC). According to analysts from Bernstein, these issuers collectively hold over $125 billion in U.S. treasuries, making them the 18th largest holders globally, just behind Saudi Arabia and ahead of South Korea.

Significant Holdings and Profitability

Stablecoin issuers have not only become major holders of U.S. treasuries but are also demonstrating significant profitability. For instance, Tether reported a net profit of $5.2 billion in the first half of 2024 from the float income generated by these treasuries. Additionally, on-chain stablecoin payment volumes have surged, tripling in the last 12 months to reach $1.4 trillion, with stablecoins accounting for approximately 50% of all on-chain transaction volumes.

Expanding Use Cases and Adoption

The stablecoin market is seeing robust growth with notable new entrants, including PayPal and Paxos’ PYUSD, and upcoming stablecoins from Ripple and Revolut. This expansion is fueled by diverse use cases ranging from providing U.S. dollar savings access for international users to enabling low-cost cross-border payments. The integration of Tether with global offshore exchanges and its use in non-U.S. markets are key growth drivers, alongside Circle’s USDC benefiting from its partnership with Coinbase.

Profiles of Users and Regional Dynamics

A recent survey by Visa, Castle Island Ventures, Artemis, and Brevan Howard Digital highlighting user behavior across countries like Nigeria, Indonesia, Turkey, Brazil, and India indicates varied motivations for holding stablecoins. Approximately 50% of respondents use stablecoins to trade crypto and NFTs, while 47% use them to save money in U.S. dollars. Other significant uses include better currency conversion rates (43%) and yield generation (39%). The younger demographic, particularly those under 35, are more inclined to hold a significant portion of their assets in stablecoins for reasons such as trust, stability, and yield opportunities.

Conclusion

Stablecoins are no longer limited to the crypto ecosystem; they have ventured into broader financial applications. With significant U.S. treasury holdings, increasing transaction volumes, and diverse use cases, stablecoins like USDT and USDC are proving to be vital components of the modern financial landscape. As their adoption grows, driven by both institutional and individual users, stablecoins are expected to continue playing a pivotal role in global finance.