Crypto’s next big thing isn’t meme coins, it’s stablecoins

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As a seasoned crypto investor with over a decade of experience navigating the digital asset landscape, I can confidently say that stablecoins are poised to revolutionize the industry and perhaps even the global financial system as we know it today.

As a researcher delving into the dynamic world of cryptocurrencies, I’ve noticed an intriguing trend. Meme coins have certainly stirred up excitement and activity among individual investors, but it’s the potential of stablecoins that truly captures my attention as a promising innovation in this space so far.

The meme coin craze keeps going strong, even though regulators are being cautious because of their wild price swings. While these tokens can offer huge returns, the real game-changer might be something that seems less exciting and even a bit boring — stablecoins.

It’s interesting to note that even skeptical parties like major banks are now finding merit in stablecoins. As stated by Citi Wealth strategists in a recent report, stablecoins might actually strengthen the U.S. dollar‘s global influence. Notably, the activity surrounding stablecoins has hit all-time highs, with a staggering $5.5 trillion worth of value circulating during Q1 of 2024.

Instead of replacing the dollar, this type of cryptocurrency might actually make dollars more widely available across the globe, thereby bolstering the U.S. dollar’s enduring global supremacy.

Citi Wealth

Instead of Bitcoin (BTC), these assets have a more stable worth, which makes them suitable for everyday transactions, saving, and lending. Most stablecoins are supported by reserves such as cash or U.S. Treasury bonds, allowing them to preserve their consistent value.

It’s interesting to note that stablecoins were initially created primarily for use by cryptocurrency traders. They allowed traders to keep their funds in a digital equivalent of the U.S. dollar rather than constantly converting to actual dollars. However, in the present day, the utility of stablecoins has grown substantially. Now, they are employed not only for cross-border transactions but also for savings and even lending purposes.

State of stablecoins

Stablecoins are expanding at an astonishing rate. For instance, since their introduction in 2014, they’ve amassed a market value exceeding $200 billion, as reported by CoinGecko. By 2024, it’s predicted by Citi that transactions involving stablecoins could reach an impressive $5.5 trillion. That’s significantly more than Visa, which handled around $3.9 trillion in transactions. Well-known stablecoins include Tether (USDT), USD Coin (USDC), and DAI (DAI). Collectively, they control the market, but they vary in terms of accessibility.

In Europe, major cryptocurrency exchanges such as Coinbase may no longer provide DAI and USDT due to the impending MiCA regulation. Tether CEO Paolo Ardoino has voiced concerns over these new rules, arguing that the regulations for stablecoins under MiCA could potentially create “systemic risks” to European banks.

As a researcher delving into the realm of digital currencies, I’ve noticed an intriguing trend: it’s not developed nations spearheading the adoption of stablecoins, but rather emerging markets that are taking the lead. In regions grappling with unstable currencies, people are increasingly turning to stablecoins as a means to acquire dollars. This is particularly evident in countries like Argentina, where high inflation renders local currency unreliable. Stablecoins offer a faster and more cost-effective alternative to traditional bank transfers, making them an attractive option for those seeking financial stability amidst economic uncertainty. Data from blockchain firm Chainalysis supports this observation.

Stablecoins and competition with US dollar

Stablecoins aren’t just a passing fad in the realm of cryptocurrencies; they appear to bolster the influence of the U.S. dollar. Notably, about 93% of all stablecoins are tied to the dollar, as pointed out by strategists at Citi. This linkage makes the U.S. dollar more reachable worldwide, particularly in regions where access to American banks is scarce. The increased availability could potentially enhance the dollar’s position as the global reserve currency, according to Citi’s analysis.

However, stablecoins are not without risks. Issues like issuer insolvency, custodian problems, and “de-pegging” can arise. Some stablecoins have collapsed in the past, while others have temporarily lost their peg. Regulators are watching closely, and new rules in the U.S. and Europe aim to make stablecoins safer for users.

Trillion dollar opportunity

In contrast to retail users in developing countries, it’s often venture capitalists who are the primary supporters of stablecoins. These investors appear to be quite enthusiastic about this concept.

Over the coming years, the realm of finance is expected to be significantly shaped by stablecoins, which could potentially reach a market value of trillions.

— Mason Nystrom (@masonnystrom) December 5, 2024

A California-based venture capital company, Pantera Capital, considers stablecoins as a “potential trillion-dollar market,” emphasizing that they currently make up more than half of all blockchain transaction activity, compared to only 3% back in the year 2020.

As a crypto investor, I’ve witnessed an astonishing transformation in the realm of digital currencies. In just a short span, stablecoins have proven their mettle as one of the groundbreaking innovations within our sphere. The year 2024, in particular, has been a pivotal moment for these reliable coins. They’ve facilitated transactions worth an astounding $5 trillion in adjusted volume, processed over a million transactions every day, and served nearly 200 million accounts. This growth is not just impressive; it’s a testament to the potential of stablecoins in reshaping the future of cryptocurrency.

Pantera Capital

According to Pantera Capital, stablecoins offer a potential resolution for the vast, trillion-dollar international transfer market. Given that annual global remittances amount to billions, Pantera is optimistic that stablecoins could soon bring about practical cross-border payments using cryptocurrencies.

As a crypto investor, I’m not the only one who sees significant potential in stablecoins. In fact, even startup accelerators like Y Combinator have identified them as a unique category for funding, underscoring their importance. Brad Floar, a group partner at Y Combinator, expresses this conviction clearly: “It’s becoming increasingly clear that stablecoins will play a substantial role in shaping the future of our monetary system.

Future of stablecoins

The stablecoin market is still growing, with companies working on tools to make payments and conversions easier. Platforms like BitPay and Coinbase Commerce allow businesses to accept stablecoins and quickly convert them to fiat, making them more user-friendly.

The development of regulation is still relatively new, but establishing clear guidelines could foster trust and attract more participants. However, regulations such as MiCA have sparked some apprehension among significant stablecoin publishers. One point that’s undeniable: as stablecoins expand, their influence over global finance is expected to become more substantial.

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2024-12-13 00:18