Top four stablecoins gaining market dominance, despite the bear market
The top four stablecoins — USDT, USDC, BUSD, and DAI — grew at an exponential rate in 2021 and the first three months of 2022, reaching a market worth R2.9 triillion. However, growth stalled in May when Terra LUNA went bankrupt, and the top four s' combined market valuation is now significantly lower.
The top four
Tether's (USDT) market share was 90% in 2020 but has since dropped to around 50% as other stablecoins have gained traction in the sector. The figure below depicts the top four stablecoins in terms of market share since January 1, 2020.
In early 2020, USDT accounted for more than 90% of the stablecoin market, with Circle's USD Coin (USDC) accounting for the majority of the remaining 10%.
However, as of October, USDT's market share had dropped to around 50%, with USDC and Binance USD (BUSD) accounting for the greater part of the remaining majority.
Supply of stablecoins
Since May, stablecoins have been steadily exiting exchanges, with only small respites in August and September. Stablecoins departing exchanges usually indicate that they are being sold for fiat to meet debt obligations or that they are being shifted into a different asset class as investors lose faith in crypto.
Top four stablecoins versus Ethereum
Since May, Ethereum's (ETH) dominance over the top four stablecoins has been declining, with stablecoins becoming more dominant in June — when ETH reached its lowest price of the year.
The dominance of the top four stablecoins at such a time indicates that investors were inclined to exchange Ethereum for stablecoins in order to protect themselves.
Following the loss of trust caused by the failure of Terra's algorithmic stablecoin, this shift toward stablecoins is a positive step toward regaining trust.
