Author: WOO

Background

On September 23, the USDC Treasury once again minted 50 million USDC on the Ethereum network, marking the second minting of 50 million USDC by Circle since September. Similarly, another stablecoin giant, Tether, also minted 1 billion USDT on the Ethereum network 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 move into the Solana ecosystem, tied with the lending protocol Kamino.

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

The issuance of stablecoins does not dilute its single value like other tokens, due to the backing collateral that allows it to anchor to the US dollar. This represents an increase in demand for stablecoins in the crypto market, which theoretically is also seen as hot money entering the market, a bullish signal.

Even though the growth of stablecoins is evident this year, the market is still criticized for the lack of liquidity and the absence of new capital. Has the above theory been proven false? What is the actual correlation between the token price, the overall crypto market's total value locked (TVL)? What are the recent strategic actions of major stablecoin issuers?

Let WOO X Research take you to explore it.

US Department of Agriculture

Data Situation

USDC had a market share of 32% in March 2022, but it has since dropped to 20.6% due to the bankruptcy of Silicon Valley Bank, and the Market Cap has fallen from $55 billion to $35 billion.

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

In the near future, the frequency of coinage on Ethereum has been raised, with 4 additional issuances of 50 million USDC in the past three weeks, totaling 200 million.

• ETH Farm: 50 million on 9/23, 50 million on 9/10, 50 million on 9/9, 50 million on 8/30
• SOLANA: 8/8 250 million, 7/20 250 million

The crazy printing of money by Circle in the past three months, issuing about 800 million USDC, has also caused the market capitalization of USDC to show a slow rising trend in 2024, repairing the scars caused by the Silicon Valley Bank.

Recent Developments

The significance of the increase in issuance, in addition to the possibility of a sign of hot money inflows mentioned above, 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, with an average of 1-2 projects per month. The types of projects invested in are mainly in the payment and RWA tracks, as well as some sporadic infrastructure projects. Recent investments include emerging concept PayFi leading Huma Funance with a financing of 38 million, and RWA credit market Centrifuge, etc.

USDC, although a centralized stablecoin, is an important underlying asset in Decentralized Finance. Circle, starting from its own business such as payments and RWA (Stablecoin bringing real-world assets on-chain can be said to be the earliest RWA), has the ability to accommodate a large amount of capital in related zones. When the market is active and the overall TVL is high, Circle can profit both on-chain and off-chain, becoming a true money-making machine. Meanwhile, Circle's founder Jeremy has recently indicated that they are planning to carry out an IPO.

Jeremy also mentioned at the Solana BreakPoint conference that he is currently exploring the combination of USDC and AI agents to ensure the flexibility and security of Wallet and other infrastructure.

From USDC issuance, investment payment, RWA, infrastructure track to AI exploration, Circle has been active, and the related tracks are worth continuing to follow.

USD

Data Situation

USDT has always been the dominant stablecoin, with a market share of up to 70%, and the majority of its circulating supply is on TRON, accounting for nearly 50%. The overall market capitalization is as high as $120 billion, growing 33% since the beginning of this year.

USDT issuance is in increments of 1 billion. This year, there will be five issuances on Ethereum and TRON, totaling 10 billion US dollars.

• ETH Workshop: 9/16 10 billion, 8/21 10 billion, 8/13 10 billion, 5/21 10 billion, 2/21 10 billion
• TRON: 8/20 1 billion, 6/15 1 billion, 5/17 1 billion, 4/4 1 billion, 1/29 1 billion

USDT occupies a large share of the stablecoin market, and its parent company Tether naturally makes a fortune. The financial report released by Tether in Q2 shows a net operating profit of 1.3 billion US dollars, reaching a record high of 5.2 billion US dollars in the first half of 2024.

The main source of revenue is the 0.1% fee charged for deposits and redemptions, as well as account verification fees, USDT loan interest income, etc.

With its strong market share and network effect, Tether has become a money printing machine in the crypto market, regardless of bull or bear.

Recent Developments

Compared to Circle's expansion from its own business, Tether is a player with a slash.

Recently announced the acquisition of 9.8% of the shares of the Latin American agricultural giant Adecoagro on September 8th. In July, it announced the development of Decentralization AI models and also invested in the cloud GPU operator Northern Data Group, with a debt financing of up to 6.1 billion US dollars. In June, it invested in the BTCMining company BitDeer and purchased one billion US dollars of BTDR stocks.

In April, it announced the establishment of four new business departments, including technology, finance, energy (Mining), and education, and launched its venture capital department Tether Evo to explore beyond stablecoins.

PY USD

Data Situation

PYUSD, unlike USDT and USDC, is not as well-established. It was launched by PayPal in 2023 and is currently only circulating on Ethereum and Solana. The circulation ratio is approximately 1:1. Although the circulating supply of Ethereum and Solana is slightly equal as mentioned above, PYUSD was not available on Solana until May of this year, and can be considered as the native stablecoin of Solana. PayPal chose Solana for its excellent settlement speed, money laundering below one cent, and an ecosystem with over 2,500 developers.

Currently, the PYUSD market capitalization is USD 722 million. Its growth rate has been very fast this year, partly due to the rapid development of Solana this year. Its market capitalization has grown by about three times, making it the seventh largest stablecoin in the market.

The recent decline in Circulating Supply is attributed to the decrease in annualized rewards for PYUSD in various Decentralized Finance protocols on Solana.

Originally, depositing PYUSD into the lending protocol Kamino for lending could generate a low-risk return of about 13%. However, as the activity comes to an end, the current return has dropped to 7%~8%, leading to a drop in deposit willingness and a consequent decrease in PYUSD Circulating Supply. The PYUSD in Kamino accounts for 78% of the total Circulating Supply on SOL. Therefore, the capital outflow from the protocol has a significant impact on PYUSD and is also one of the risks that PYUSD holders need to consider.

Recent Developments

PayPal launched PYUSD in August last year, which seems to be a latecomer, but PayPal Ventures actually had investment records in encryption projects as early as 2019. This year, there are 4 investments in three projects, including on-chain risk control company Chaos Labs, in which it participated in all three rounds of financing (leading the seed round in 2023).

In addition, it also includes this year's popular interest-bearing Stable Coin project Ethena and the payment platform Mesh. It can be seen that PayPal's development direction still revolves around its own Stable Coin and payment business.

Stable CoinMarket Cap and Decentralized Finance TVL & BTC price correlation

Reviewing past experiences, the correlation between Stable CoinMarket Cap and BTC price is as follows

• In 2021, as the price of BTC rises, the market capitalization of Stable Coins is also increasing. This represents funds flowing into the Cryptocurrency market, and investors may temporarily keep their funds in Stable Coins, waiting for an opportunity to buy BTC or other encryption assets.
• In 2022, as the market declines, both the BTC price and the Stable Coin Market Cap are falling, indicating that funds are leaving the market, and investors are exchanging Stable Coin back to Fiat Currency or directly withdrawing funds.
• From 2023 to 2024, the prices of BTC and Stable CoinMarket Cap both show a gradual rise trend, implying a renewed interest in the market and funds flowing back into the Cryptocurrency market.

There is a strong positive correlation between BTC price and Stable Coin Market Cap. When BTC price rises, Stable Coin Market Cap usually increases, indicating an influx of market funds; conversely, when BTC price drops, Stable Coin Market Cap also decreases, indicating an outflow of market funds.

The trend of Decentralized Finance TVL is strongly positively correlated with Stable Coin Market Cap, and the line chart almost perfectly overlaps. Recently, Stable Coin has been continuously issued, and we can also expect the market to restore liquidity for both BTC and AltCoin after a continuous influx of hot money.