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Signs of market recovery? Can the issuance of stablecoins drive the market up?

24-09-26 15:58

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Original title: "Can the issuance of stablecoins really drive the market up? Revealing the recent dynamics of USDT, USDC and PYUSD"

Original source: WOO Research

Background

On September 23, USDC Treasury once again minted 50 million USDC on Ethereum. This is the second time that Circle has minted 50 million USDC since September. Coincidentally, another stablecoin giant Tether also minted 1 billion USDT on Ethereum on September 16.

In addition to the issuance of the two most mainstream stablecoins on the market, PYUSD launched by Web 2 payment giant PayPal is a strong attack on the Solana ecosystem and is bound to the lending protocol Kamino.

According to DeFiLlama data, the overall market value of stablecoins has grown from $130 billion to $172 billion since 2024, with a year-to-date increase of 32%.

The issuance of stablecoins is not like other tokens whose single value is diluted. Because the collateral behind it allows it to be anchored to one dollar, it represents the increase in demand for stablecoins in the crypto market. In theory, it is also regarded as hot money pouring into the market, which is a bullish signal.

Even though the growth of stablecoins this year is obvious to all, the market is still criticized for lack of liquidity and no new funds in this cycle. Has the above theory been proven to be false? What is the actual correlation with the currency price and the TVL of the overall crypto market? What are the recent strategic actions of the above-mentioned major stablecoin issuers?

Let WOO X Research take you to find out.

U.S. Department of Agriculture

Data Situation

USDC had a market share of 32% in March 2022. After the bankruptcy of Silicon Valley Bank, its current market share is only 20.6%, and its market value has fallen from 55 billion U.S. dollars to 35 billion U.S. dollars.

Although the bankruptcy of Silicon Valley Bank has brought a huge impact on USDC, starting in July 2024, USDC first minted 250 million USDC on Sol; in August, it continued to mint 2 times of 250 million USDC on Sol, and issued 2 times of 50 million USDC on Ethereum

In September, the frequency of Ethereum minting was increased, with 50 million USDC issued four times in three weeks, totaling 200 million.

· Ethereum: 50 million on 9/23, 50 million on 9/10, 50 million on 9/9, 50 million on 8/30

· SOLANA: 250 million on 8/8, 250 million on 7/20

Circle's crazy money printing in the past three months has increased the issuance of about 800 million USDC, which has also caused the market value of USDC to show a slow upward trend in 2024, repairing the scars caused by Silicon Valley Bank.

Recent Dynamics

In addition to the above-mentioned signs of hot money influx, the significance of the additional issuance also represents the issuer's optimism about the future of the overall crypto market.

Circle Ventures invested in a total of 12 projects in 2024, investing in 1 to 2 projects a month. The investment projects are mostly payment, RWA tracks, and some sporadic infrastructure. For example, Huma Funance, the leader of the emerging concept PayFi, which recently raised 38 million yuan, and Centrifuge, the RWA credit market, etc.

Although USDC is a centralized stablecoin, it is an important underlying asset in DeFi. Circle starts from its own business such as payment and RWA (stablecoins can be said to be the earliest RWA that brings real assets to the chain). The relevant sectors have the ability to accommodate a large amount of funds. When the market is hot and the overall TVL rises, Circle will be able to make money on both the chain and off the chain, becoming a veritable money-making machine. And Jeremy, the founder of Circle, also recently stated that he is promoting an IPO plan.

Jeremy also stated at the Solana BreakPoint conference that he is exploring the combination of USDC and AI agents to ensure the flexibility and security of infrastructure such as wallets.

From USDC issuance, investment payment, RWA, infrastructure track to AI exploration, Circle has made frequent moves, and related tracks deserve continued attention.

Tether

Data Situation

USDT has always been the dominant stablecoin, with a market share of 70%, and the main circulation volume is on TRON, accounting for nearly 50%. The overall market value is as high as 120 billion US dollars, and it has grown by 33% since the beginning of this year

USDT is issued in units of 1 billion. This year, it has been issued five times on Ethereum and TRON, that is, 10 billion US dollars.

· Ethereum: 1 billion on 9/16, 1 billion on 8/21, 1 billion on 8/13, 1 billion on 5/21, 1 billion on 2/21

· TRON: 1 billion on 8/20, 1 billion on 6/15, 1 billion on 5/17, 1 billion on 4/4, 1 billion on 1/29

USDT occupies a large part of the stablecoin market, and its parent company Tether has naturally made a lot of money. The financial report released by Tether in Q2 shows that the net operating profit reached US$1.3 billion, and the profit in the first half of 2024 was US$5.2 billion, a record high.

The main source of revenue is the 0.1% handling fee charged when depositing and redeeming, in addition to account verification fees, USDT loan interest income, etc.

Tether has a strong market share and brings about a network effect. Regardless of bull or bear markets, it has become a money printing machine in the crypto market.

Recent Dynamics

Compared to Circle expanding its territory from its own business, Tether is a slash player.

Recently, on September 8, it announced the acquisition of a 9.8% stake in Latin American agricultural giant Adecoagro. In July, it announced the development of a decentralized AI model and also invested in Northern Data Group, a cloud GPU operator, with debt financing of up to $610 million. In June, it invested in Bitcoin mining company BitDeer and bought $100 million in BTDR shares.

In April, it announced the establishment of four new business units, including technology, finance, energy (mining) and education, and launched its venture capital unit Tether Evo to explore tracks other than stablecoins.

PY USD

Data situation

PYUSD is not as old as USDT and USDC. It was launched by PayPal in 2023 and is currently only circulated on Ethereum and Solana, with a circulation ratio of about 1:1. Although Ethereum and Solana are slightly equal in circulation, PYUSD was not launched on Solana until May this year, so PYUSD can be regarded as the native stablecoin of Solana. PayPal chose Solana for its excellent settlement speed, transaction fees of less than one cent, and an ecosystem with more than 2,500 developers.

The current market value of PYUSD is 722 million US dollars. It has grown very fast since the beginning of this year. On the one hand, it has also benefited from the rapid development of Solana this year. The market value has grown by about 3 times, ranking seventh among the overall stablecoins.

The recent decline in circulation is attributed to the decline in the annualized reward for PYUSD in various DeFi protocols on Solana.

Originally, depositing PYUSD in the lending protocol Kamino for lending could obtain a low-risk return of about 13%, but with the end of the activity, the current return is between 7% and 8%, and the willingness to deposit has decreased, so the circulation of PYUSD has decreased. PYUSD in Kamino accounts for 78% of the total circulation on SOL, so the flight of funds from the protocol has a great impact on PYUSD, and it is also one of the risks that PYUSD holders need to consider.

Recent News

PayPal launched PYUSD in August last year. It seems to be a latecomer, but in fact, PayPal Ventures has a record of investing in crypto projects as early as 2019. There are 4 investments this year, a total of three projects, among which Chaos Labs, an on-chain risk control company, has participated in all three rounds of financing (the seed round was led in 2023)

In addition, it also includes Ethena, a popular interest-bearing stablecoin project, and Mesh, a payment platform. It can be seen that PayPal's development direction is still centered around its own stablecoin and payment business.

Stablecoin market value and DeFi TVL & Bitcoin price correlation

Reviewing past experience, we can find that the correlation between the stablecoin market value and the Bitcoin price is as follows

In 2021, as the price of Bitcoin rose, the market value of stablecoins also increased, which means that funds are flowing into the cryptocurrency market. Investors may temporarily keep their funds in stablecoins and wait for opportunities to buy Bitcoin or other crypto assets.

In 2022, as the market fell, both the price of Bitcoin and the market value of stablecoins fell, indicating that funds are withdrawing from the market, and investors exchanged stablecoins back to fiat or directly withdrew funds.

From 2023 to 2024, both the price of Bitcoin and the market value of stablecoins showed a gradual upward trend, suggesting that the market has regained interest and funds have flowed into the cryptocurrency market again.

There is a strong positive correlation between Bitcoin price and stablecoin market value. When Bitcoin price rises, stablecoin market value usually increases, indicating an inflow of funds from the market; conversely, when Bitcoin price falls, stablecoin market value also decreases, indicating an outflow of funds from the market.

The trend of DeFi TVL is even more strongly positively correlated with the stablecoin market value, and the line chart almost perfectly overlaps. With the recent continuous issuance of stablecoins, we can also expect that after the continuous influx of hot money, both Bitcoin and altcoins will be able to restore liquidity.