Largest surge in stablecoin supply recorded since October
Glassnode data shows that the aggregate supply of stablecoins, which are cryptocurrencies pegged to fiat currencies, saw a significant increase of $4.1 billion in one month. This surge marks a 21-month high for stablecoins and is a result of the bullish momentum in the cryptocurrency market. The rise in stablecoin supply has been closely linked to the increase in the price of Bitcoin since October of last year. As of January 18th, the aggregated market cap of stablecoins exceeded $128 billion, which is the highest it has been since March 2022.
Among the stablecoins, Tether’s USDT dominated the market with a market share of nearly 73%. The second-largest stablecoin, Circle USD Coin (USDC), followed with a 19% share. Binance USD (BUSD) issued by Paxos, which is currently facing allegations from the Securities and Exchange Commission regarding its status as a security, came in third. MakerDAO’s DAI and TUSD were also included in Glassnode’s report.
The collective pool of stablecoins plays a crucial role in cryptocurrency transactions, whether it be through centralized platforms like Coinbase or decentralized exchanges like Uniswap. The supply and market cap of stablecoins are often used as indicators of market sentiment, with increases typically associated with a bullish outlook.
In addition to their growing popularity, stablecoins have also seen an increase in illicit transactions. A report by Chainalysis on Crypto Crime Trends revealed that stablecoins accounted for approximately 60% of illegal transactions over a span of two years. It should be noted that these findings are based on initial estimates and may not apply to all criminal activities.
Unlike more decentralized protocols, stablecoin issuers like Tether have the ability to freeze accounts and work closely with law enforcement agencies. Tether’s operator has already deactivated more than 30 addresses associated with suspicious transactions in Israel and Ukraine.
Despite the rise in illicit transactions involving stablecoins, the report highlights that Bitcoin remains the preferred choice for bad actors due to its high liquidity. However, there has been a 30% decrease in illicit finance involving Bitcoin since 2021.
It is important to stay updated on the latest developments in the stablecoin market and its implications for the broader cryptocurrency industry.
