Stablecoin market share rises to 12.9% as of January 2023, CoinGecko report finds

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Despite a shrinking in the overall digital asset market, stablecoins are capturing a growing slice of the pie even as several high-profile collapses in the past year have called the stability of these so-called stablecoins into question, according to the Stablecoin Statistics 2023 report.

The CoinGecko report covers the period of January 2022 to January 2023, stopping just short of the most recent bank run affecting the markets. It reveals that as of January this year, the market cap of all stablecoins stood at $138.4 billion. This is $29.5 billion less than the year before, no doubt being dragged alongside the broader digital asset market which saw its market cap shrink by $1.2 trillion. Despite this, however, the share of the total digital asset market cap occupied by stablecoins grew from 7.3% to 12.9%.

This is reflected in the rates of stablecoin ownership turned up by CoinGecko’s research. According to them, 75% of digital asset owners currently hold stablecoins and just 9% claim to have never held any. The vast majority (65%) of these owners report ownership of between 0 and 25% of their portfolio.

Tether remains the best-capitalized stablecoin at $67.8 billion, but USDC isn’t far behind at $42.7 billion. Those two remain by far the largest stablecoins: BUSD sits in a distant third at $15.7 billion. Top dog USDT shrank by 13.5% in the year since January 2022, but USDC and BUSD both grew their cap by 1.2% and 8.9%, respectively. 

Interestingly, 2022 saw the market share occupied by smaller stablecoin projects vanish, with a significant drop-off in May 2022 which never reversed. That makes sense: it was around this time that the Terra/Luna collapse was happening, an event which almost certainly had a cooling effect on enthusiasm for the coins.

The space vacated by these smaller projects was mostly gobbled up by the top three: in the past year, USDT, USDC and BUSD grew their market shares by 2.3%, 5.7% and 2.8% respectively.

In terms of trading volume, USDT remains king, accounting for over 75% of stablecoin volume on centralized exchanges. These CEX are also still widely used to store stablecoins, even after the FTX disaster. According to CoinGecko, 26% of all circulating stablecoins are held on CEXs.

Ethereum remains the chain-of-choice for stablecoins. Recent reassessments of Ethereum by the SEC and other law enforcement bodies may spell the end of this dominance: the New York Attorney General (NYAG) just took action against an exchange for selling illegal securities, counting the ETH token among them, while Securities and Exchange Commission (SEC) Chair Gary Gensler indicated that proof-of-stake models such as that underpinning Ethereum are likely illegal securities.

The report also looked at the kinds of stablecoin projects that fail compared to those that ended up succeeding. It found that the decentralized stablecoins—such as Terra/Luna and Fei USD—were most likely to fail.

One obvious impact of the past 12 months of turmoil in digital asset markets has been the spurring into action of regulators and lawmakers seeking to control contagion and protect investors. To that end, stablecoins have increasingly been featured in rulemaking around the globe. The report found a range of legislative initiatives aimed at stablecoins from both global and national authorities. These include work by the Financial Stability Board, the Bank of International Settlements, the European Commission, U.S. Congress, the Monetary Authority of Singapore, the Reserve Bank of Australia and the Hong Kong Monetary Authority.

Stablecoins: too big to fail?

CoinGecko’s findings are notable because they cover the most volatile year in digital assets since the early days of the industry. 2022 saw the collapse of both highly capitalized stablecoins such as Terra/Luna and highly centralized exchanges such as FTX. The apparent malfeasance behind these collapses and the massive growth that precipitated them has no doubt dampened enthusiasm and ultimately contributed to the market slowdown described by CoinGecko. It is also the likely reason that new, smaller stablecoin projects have dried up.

However, this only makes the continued growth in the larger stablecoins stand out more—particularly since the biggest stablecoins USDT and USDC depegged during this time and yet remain dominant players.

USDC, at least, did not escape the bank run. It was revealed that Circle, which issues USDC, had $3.3 billion of the asset’s reserves parked in Silicon Valley Bank, which meant that the company was unable to meet redemptions as it scrambled to find liquidity. During the crisis, USDC hit a low of $0.877.

USDC regained its peg after the FDIC stepped in to assure that it would cover all deposits made to SVB. However, the incident highlighted the uncertain ground upon which these supposedly stable coins are built. For an asset class which boasts it can offer the benefits of digital assets without sacrificing the perceived stability that comes with fiat, that’s a big problem.

As you’d expect, the chaos led to an exodus of USDC liquidity even after it regained its peg: according to on-chain data, 10.2% of all USDC was redeemed following the events of March 11. BUSD, Binance’s stablecoin, also saw its circulation slide from 8.6 billion to 8.2 billion.

And yet, today, USDC has re-joined USDT in trading at parity with the dollar, as though they broke peg at all.

This may come down to the simple fact that these incumbents have been printing their stablecoins for too long to give up now, and the industry has spent too long relying on them to give up either. After all, once new stablecoins are issued they’re sent straight to a small group of exchanges and swapped for assets like BTC. If the coins are as backed as they claim—and all evidence seems to indicate that they are not—then this isn’t an issue. However, if they are unbacked, then these stablecoins are essentially money printed out of thin air to prop up the prices of BTC and the commissions earned by exchanges that allow trading in it.

How many other plausible ways are there to explain the fact that USDT trading volume long-since surpassed that of BTC and ETH and has remained there even as the digital asset market as a whole remains highly depressed? How many other ways are there to explain the fact that less than two weeks after the most damaging digital asset bank collapse in industry history, the price of BTC inexplicably hit highs not seen since the Terra/Luna crash? Tether, for what it’s worth, has already printed $9 billion worth of USDT in 2023 alone—and those Tethers are likely still heading for Bitfinex, Huobi and Binance where they’re used to pay for BTC and all manner of digital assets.

Watch: Tokenized assets, stablecoins and custody with BSV