As an analyst with a background in financial markets and blockchain technology, I find Visa’s report on stablecoins intriguing but also raise some concerns regarding its objectivity. The discrepancy between reported and authentic stablecoin usage is significant, with over 90% of transactions not originating from real users. This gap could have major implications for the crypto market.
As a financial analyst, I’ve closely examined Visa’s report on stablecoins with great interest. However, it’s essential to question the report’s objectivity given my role as an impartial observer. The term “stablecoin” refers to digital currencies that aim to maintain a stable value by pegging to traditional assets like the US Dollar.
In simpler terms, a recent investigation conducted by Visa and Allium Labs revealed that approximately 90% of transactions involving stablecoins – digital currencies touted for their stability and practicality in the crypto world – are not being carried out by authentic users.
Based on information from Cuy Sheffield, who leads the digital currency team at Visa, the value of all stablecoin transactions recorded between April 24 and 30 days prior was an astounding $2.65 trillion.
As an analyst, I’ve discovered that out of the total amount identified, which is $2.5 trillion, only a small portion, equivalent to $265 billion, can be attributed to genuine transactions. This signifies a significant disparity between the reported figures and the actual usage.
As an analyst, I’ve observed an intriguing finding from the study: despite some variation in the data, there has been a consistent increase in the number of monthly active stablecoin users. This trend underscores a sustained level of engagement and fascination with these digital assets.
The question arises: if most cryptocurrency transactions aren’t initiated by genuine users, then who is behind these transactions, and what implications could this have on the crypto market?
What really is happening?
Cryptocurrencies called stablecoins keep their value consistent by linking it to a base asset, most commonly a fiat currency such as the US dollar. Their steadiness is alluring for several uses, which include trading, money transfers, and routine purchases.
Although stablecoins transactions through Visa’s dashboard account for fewer than 10%, these transactions are primarily not attributed to typical payment activities.
A significant cause for this disparity is the widespread use of automated bots in the cryptocurrency market. Capable of carrying out trades rapidly and in large quantities, these bots distort the true picture of human engagement and consumption tendencies.
Concurrently, the adaptable character of blockchain systems adds complexity to distinguishing genuine user activities from automated ones. Blockchain technology facilitates various applications, such as self-executing deals. This versatility, however, complicates efforts to discern between human-initiated and machine-generated transactions.
A significant source of difference in the number of transactions for stablecoins is the issue of double-counting, where certain transactions are recorded more than once.
Swapping $100 worth of stablecoin A for stablecoin B on an exchange might be reflected as a $200 transaction in the recorded stablecoin trading volume. Such actions can artificially boost transaction numbers, giving a deceptive representation of the true level of stablecoin usage.
Visa and Allium Labs’ have used two filters to identify such activities.
A volume filter that only detects the biggest stablecoin transfer in each transaction is among the applied filters, disregarding repetitive internal transactions resulting from intricate smart contract exchanges.
An extra filter is used for inorganic users, limiting the analysis to accounts with under 1000 stablecoin transactions and a total transfer volume below $10 million within the past month.
Although the gap existed between the overall transfer amount and the adjusted figure for stablecoin transactions, the investigation uncovered a persistent rise in the monthly active user count. As of April 24th, a grand total of 27.5 million individuals were utilizing these digital currencies across all blockchains, pointing towards an ongoing upward trend.
Analysis of USDC and USDT usage trends
As a researcher, I’ve uncovered some intriguing data from Visa’s recent analysis. Over the past eight months, there has been a noteworthy increase in the adoption and utilization of USD Coin (USDC).
In September 2023, USDC accounted for 23% of all stablecoin transactions analyzed by Visa.
By the close of the year, the number of transactions involving stablecoins had surpassed the 50% mark, with over two times the initial amount transpiring by the end. Starting from December 2023, USDC dominated stablecoin transactions, accounting for up to 60% in February 2024.
This trend contrasts with the market capitalization of Tether (USDT) and USDC.
Starting from May 7, the market capitalization of USDT amounts to around $111 billion, significantly greater than USDC’s market cap which is roughly over $33 billion.
The disparity indicates that although USDT holds the largest market capitalization among stablecoins, USDC is more frequently utilized for real-transactions than USDT.
As a researcher studying the developments in the payments industry, I’ve come across Pranav Sood’s perspective on Visa’s recent findings regarding stablecoins. According to Sood, who holds the position of executive general manager for EMEA at Airwallex, these findings suggest that stablecoins are still in their infancy as a payment instrument. He emphasized the importance of enhancing existing payment systems to ensure their continued relevance and effectiveness in the face of emerging technologies like stablecoins.
However, not all experts agree with Visa’s analysis.
As a stablecoin analyst at Agora, I’ve taken note of Nick van Eck’s criticism towards Visa’s approach to evaluating stablecoin adoption. According to him, the data being used by Visa might inadvertently include trading firms that engage in legitimate transactions using stablecoins. This inclusion could potentially distort the true picture of user adoption among the general public.
Visa’s report and the rise of stablecoins
As a financial analyst, I’ve been closely following Visa’s latest report, and I must admit that it aligns perfectly with the rising trend of stablecoins revolutionizing cross-border payment solutions.
Based on Sacra’s findings, the value of stablecoin transactions has experienced a remarkable increase from $26 billion in January 2020 to an astounding $1.4 trillion by April 2024. This growth may even surpass Visa’s payment volume during the second quarter of 2024.
According to Sacra’s report, transactions involving stablecoins are completed in just a few minutes, significantly faster than the 6 to 9 hours it takes for conventional systems to process such transactions.
As a crypto investor, I can tell you that from a cost perspective, transacting with stablecoins is more economical than using traditional methods. The fees associated with stablecoin transactions are as minimal as $0.0037. In contrast, the average fee for traditional transactions hovers around $12.
Currently, prominent financial institutions such as Wells Fargo, JPMorgan Chase, Visa, and Mastercard are investigating the implementation of stablecoins to boost their payment systems.
As a researcher, I’m left pondering the true intent behind Visa’s reports. Are they intended to present factual information, or could there be an underlying attempt to discredit the competition?
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2024-05-07 14:12