Author: WOO Research

Background

On September 23, the USDC Treasury once again minted an additional 50 million USDC on the Ethereum network, marking the second time Circle has minted an additional 50 million USDC 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 the Web 2 payment giant PayPal is a strong move into the Solana ecosystem, tied to the lending protocol Kamino.

According to DeFiLlama data, the overall Market Cap of Stable Coins has grown from $130 billion in 2024 to the current $172 billion, with a staggering 32% increase during the year.

The issuance of stablecoins does not dilute its value like other Tokens. Due to the backing collateral that allows it to be anchored to one US dollar, it represents an increase in demand for stablecoins in the crypto market. In theory, it is also seen as hot money flowing into the market, which is a bullish signal.

Even though the growth of stablecoins this year is evident, the market is still criticized for lacking liquidity and not attracting new funds. Has the above theory been proven false? What is the actual correlation between token price, total encryption market value (TVL), and the stablecoin issuers' recent strategic moves?

Let WOO X Research take you on a journey of exploration.

United States 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 impact of the bankruptcy of Silicon Valley Bank. The Market Cap has also fallen from $55 billion to the current $35 billion.

Although the Silicon Valley Bank bankruptcy had a huge impact on USDC, starting in July 2024, USDC will first mint 250 million USDC on Sol; In August, it will continue to mint 2 times 250 million USDC on Sol. On Ethereum, there will be 2 additional issuances of 50 million USDC.

In the recent September, the frequency of minting on Ethereum was increased, with 4 additional issuances of 50 million USDC within three weeks, totaling 200 million.

· ETH: 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 printing of money in the past three months, issuing about 8 billion USDC, has also led to a slow rise in USDC's market capitalization in 2024, repairing the scars brought by the Silicon Valley Bank.

Recent Developments

The significance of the additional issuance, in addition to the possible sign of the influx of hot money mentioned above, also represents the issuer's optimism about the future of the overall encryption market.

Circle Ventures invested in a total of 12 projects in 2024, investing in 1-2 projects per month, mostly in the payment and RWA tracks, as well as some miscellaneous infrastructure. Recent financing includes emerging concept PayFi leading Huma Funance, which raised 38 million yuan, and RWA credit market Centrifuge.

USDC is a centralized stablecoin, but it is an important underlying asset in Decentralized Finance. Starting from its own business such as payments, RWA (bringing real-world assets on-chain can be said to be the earliest RWA), Circle 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 real money-making machine. Recently, Circle's founder Jeremy also mentioned that they are planning to carry out an IPO.

Jeremy also stated 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 continuous follow.

USD

Data Situation

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

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

· ETH block: 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 reaps huge profits. 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% handling 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 encryption market, regardless of bull or bear.

Recent Developments

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

Recently announced on September 8th the acquisition of 9.8% stake in Latin American agricultural giant Adecoagro. In July, announced the development of a Decentralization AI model, as well as investment in cloud GPU operator Northern Data Group, with a debt financing of up to $610 million. In June, invested in BTCMining company BitDeer, buying $100 million worth of BTDR stock.

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

PY US Dollar

Data Situation

PYUSD, unlike the well-established USDT and USDC, 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 Circulating Supply as mentioned above, PYUSD was not launched on Solana until May of this year and can be considered as the native stablecoin of Solana. PayPal's choice of Solana is due to its excellent Settlement speed, Money Laundering below one cent, and an ecosystem with over 2,500 developers.

Currently, the PYUSD market capitalization is 722 million US dollars, with a rapid growth rate since this year. On the one hand, it also benefits from the rapid development of Solana this year, with a market capitalization growth of about three times, ranking seventh among all stablecoins.

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 earn a low-risk yield of about 13%. However, as the activity ends, the current yield has dropped to 7%~8%, leading to a drop in deposit willingness and a decrease in the PYUSD Circulating Supply. PYUSD in Kamino accounts for 78% of the total Circulating Supply on SOL. Therefore, the fund outflow from the protocol has a significant impact on PYUSD, which 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 late entry, but in fact, PayPal Ventures had investment records in encryption projects as early as 2019. There were 4 investments this year, involving three projects, among which the on-chain risk control company Chaos Labs participated in all three rounds of financing (leading the seed round in 2023)

In addition, it also includes this year's popular interest-earning Stable Coin projects Ethena and 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与 Decentralized Finance TVL & BTC价格关联

Reviewing past experiences, we can find the correlation between Stablecoin Market Cap and BTC price 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 hold funds in Stable Coins, waiting for opportunities to buy BTC or other encryption assets.

In 2022, as the market declines, both BTC price and Stable Coin Market Cap are decreasing, indicating that funds are exiting the market and investors are exchanging Stable Coin back to Fiat Currency or withdrawing funds directly.

From 2023 to 2024, both the BTC price and the Stable CoinMarket Cap show a gradually rising trend, indicating a renewed interest in the market and a re-inflow of funds into the Crypto Asset market.

There is a strong positive correlation between the BTC price and the Stable CoinMarket Cap. When the BTC price rises, the Stable CoinMarket Cap usually increases, indicating the inflow of market funds; conversely, when the BTC price falls, the Stable CoinMarket Cap also decreases, indicating the outflow of market funds.

The trend of Decentralized Finance TVL is strongly positively correlated with the stablecoin market capitalization, and the line chart almost perfectly overlaps. Recently, stablecoins have been continuously issued, and we can also expect the market to regain liquidity after the influx of hot money, whether it is BTC or altcoins.