Stablecoins are a type of cryptocurrency the main property of which is to maintain a stable price of the asset. Unlike popular cryptocurrencies like Bitcoin and Ethereum, which can often display high volatility, stablecoins are pegged to more stable underlying assets which may include fiat currencies like the US Dollar and euro, gold, and even US Treasuries. This makes them less prone to dramatic price swings, hence so useful in the crypto market.
In trading, stablecoins are typically used as quote assets in trading pairs and serve as a tool for preserving the fiat value of trades, eliminating the need to cash out. In a sense, stablecoins act as fuel for crypto trading, providing an undeniable convenience in transactions, without which the process would more likely resemble what it looked like in the early days of Bitcoin.
Stablecoin Market Cap Hits $173B
The new milestone in overall market capitalization for stablecoins, now at $173 billion, indicates that the market has the need for even greater liquidity to organically drive growth and trading activity among the networks. The current phase of continuing stablecoin issuance began in September 2023, the same time when Bitcoin managed to break through its long stalemate in price to later reach an all-time value high of $73,750 in March 2024.
Key Stablecoin Market Players
Tether (USDT) is the largest player in the stablecoin market, making up about 69.5% of the overall market capitalization. USDT is issued on numerous popular blockchains, including Ethereum, Avalanche, Solana, and Tron. Other major players in the market include Circle's USDC and decentralized stablecoin DAI. The latter, unlike USDT and USDC, utilizes a more decentralized governance approach and is backed by other crypto assets. 
"USDT and USDC now represent nearly 50% of the total transaction volume among major crypto assets, underscoring the crucial role stablecoins play in providing liquidity and stability to the market," DeFi analytics platform IntoTheBlock tweeted.
How Exchanges Fuel Stablecoin Growth
After all, the business model of stablecoin issuers is closely tied with major blockchains and crypto exchanges, since most of the user demand for stablecoins emanates from such platforms. In regard to the growing market capitalization of stablecoins, Pauline Shangett, CMO at crypto exchange ChangeNOW, commented:
"In general, an increase in the stablecoin supply suggests that more capital is being deployed to protocols, signaling increased liquidity across networks. As a result, more stablecoins in circulation typically imply an uptick in trading activity, as they provide immediate liquidity for traders looking to quickly enter or exit positions on exchanges."
Impact of Stablecoins on the Market
In the past couple of years traditional financial players have become increasingly conscious of stablecoins' utility as financial instruments. Companies like PayPal (NASDAQ:PYPL), Revolut, and Japan’s Sony Bank have already either introduced their own stablecoins or announced trials of such, hinting at their growing mainstream adoption in the near future.
"The top five stablecoins collectively held more U.S. Treasuries than some G20 nations like South Korea and Germany. As a result, the growth of stablecoins provides a new source of demand for U.S. debt and aids in liquidity provisioning for the U.S. Treasury market, making stablecoins a net positive for the broader financial system," noted Bitwise’s Analysts Juan Leon and Ari Bookman in their recent report.
In their current form, stablecoins have become a fundamental part of the crypto industry, serving as a means of trading, storing and transferring value. As such, stablecoin market capitalization, is a reliable indicator of the overall state of the cryptocurrency market and can be used to foreshadow potential market movements.