Stablecoins Like Tether 'Becoming Systemically Important': Bernstein

Stablecoins have emerged as a significant force in the global financial landscape, reaching new heights in circulation and usage, according to a recent report by Bernstein analysts.

What Happened: The total supply of stablecoins has rebounded to an all-time high of $170 billion, with monthly settlement volumes tripling over the last 12 months to $1.4 trillion in July 2024. This growth underscores stablecoins’ increasing importance in the crypto ecosystem and beyond.

“Stablecoins are becoming systemically important – now 18th largest holder of U.S treasury along with large sovereign holders,” the analysts noted. They highlighted stablecoins’ role in providing USD savings access to international users and serving as the primary base currency for crypto trading.

Tether USDT/USD remains the dominant player with $120 billion in circulation, followed by Circle’s USDC/USD at $35 billion. The analysts attributed Tether’s lead to its integration with global offshore exchanges and cross-border payments usage in non-US markets.

Bernstein rated Robinhood HOOD an Outperform with a price target of $30 as it expects the platform to continue integrating stablecoins for crypto trading & cross-border transfers. Robinhood has recently acquired the international crypto exchange Bitstamp.

Also Read: Revolut Plans To Launch Stablecoin: ‘Crypto Is Part Of Our Belief In Banking Without Borders’

Why It Matters: Interestingly, stablecoin adoption appears to be decoupling from overall crypto market volatility. Monthly active wallets holding stablecoins have consistently risen to 22 million, despite fluctuations in trading volumes. This suggests growing usage beyond just crypto trading.

The report also highlighted the emergence of new players in the stablecoin space, including PayPal‘s PYUSD/USD, which has reached nearly $1 billion in circulation since its launch.

Ethereum ETH/USD continues to dominate stablecoin transaction volume, accounting for about 45% of total transfers.

Perhaps most notably, the analysts found that younger demographics, particularly in emerging markets, are embracing stablecoins as a store of value. "20% of 18-24-year-olds (in emerging markets) hold 25-50% of their portfolio in stablecoins," the report stated, indicating a growing trend of using stablecoins as an alternative to local currencies.

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