Stablecoins grow massively: A market overview
Stablecoins are becoming increasingly important. In 2020, both their trading volume and market capitalisation have increased significantly – the launch of Diem (formerly: Libra) as one of the most important stablecoins is probably imminent in 2021. But how many stablecoins are there at the moment? And what are the existing stablecoins backed by? Which reference units are used? These questions are discussed in this guest article by Jonas Groß and Hannes Zarnkow.
The market for stablecoins has developed rapidly in recent years. Although many Bitcoin Formula scam stablecoin projects are only temporarily on the market or fail before launch, the number and variety of stablecoin projects is increasing significantly. The following figure shows all active and planned stablecoins according to their type, i.e. off-chain, on-chain, algorithmic and alternative stablecoins.
According to our estimates, there are currently (as of August 2020) a total of 194 stablecoins, which are unevenly distributed across the individual categories. Of the 194 stablecoins, around 78 percent have already been issued, while around 22 percent have not yet been issued. 125 stablecoins, or around 64 percent, can be assigned to the off-chain stablecoins. Here, some initiatives are in the planning stage, whereby the issuance of the stablecoins has not yet taken place. The second most common category is on-chain stablecoins with 26 percent (51 stablecoins). Algorithmic and other alternative concepts are about equally represented with eleven and seven stablecoins respectively.
Gold and US dollars lead the field
In addition to the classification of existing stablecoins, it is also very informative to look at the reference units of the stablecoins. The following figure shows these for the 194 identified stablecoins.
Around 50 percent of all stablecoins use the US dollar or gold as reference units. Other established fiat currencies such as the euro or the Swiss franc are also often the reference currency of stablecoins. Overall, around 68 percent of all stablecoins use a fiat currency as a reference unit, and more than half of them are backed by fiat currencies. Occasionally, stablecoins have alternative reference units, such as various baskets of goods and currencies or even the global gross domestic product (GDP).
Comparing these figures with those from 2019, it is clear that the number of active stablecoins has increased from 54 to a total of 152. Thus, the number has almost tripled within one year. If all currently planned stablecoins are implemented, there could soon be more than 200 stablecoins on the market. In addition to the number of stablecoins, the variety has also increased. There are now stablecoins in an additional 17 currencies on the market compared to 2019, which has significantly expanded the range of stablecoins.
Conclusion and interpretation
The market for stablecoins has developed rapidly in the past year. There are now 194 stablecoin projects, of which 152 are active – and the trend is rising. Compared to the previous year, there are significantly more stablecoins on the market. In addition, the type of collateral has been significantly expanded. Compared to 2019, there are 17 more currencies that serve as reference units for Stablecoins. Mainly, stablecoins are collateralised with gold or US dollars in more than 50 percent of the cases.
Stablecoins have one main use case: they mimic fiat currencies to be used as a means of payment and store of value. In countries with unstable national fiat currencies, stablecoins have become a non-negligible component of the financial system. One example is the increasingly important role of stablecoins in Latin American countries such as Argentina. For the actual use of stablecoins, stability is of utmost relevance – only a stablecoin that maintains purchasing power and is backed by a stable reserve is attractive as a means of payment and store of value.