Stablecoins are experiencing a resurgence. Their market capitalization has reached $161 billion, the highest level since April 2022, according to CCData’s May report. This eight-month growth spurt comes after the major blow dealt by the TerraUSD collapse in 2023.
Circle’s USDC is a major driver of this growth, with its market cap skyrocketing to $32.6 billion fueled by a surge in demand. In March, USDC pairs saw record monthly trading volume, pushing its market share by volume to a dominant 8.27% for two consecutive months.
Meanwhile, Tether (USDT) is also enjoying success. Tether Holdings reported a record $4.52 billion profit in Q1 2024, coinciding with USDT’s impressive run. USDT’s market cap has seen nine consecutive months of growth, currently sitting at a substantial $111 billion.
However, the stablecoin boom is happening alongside a slow rollout of Central Bank Digital Currencies (CBDCs). The International Monetary Fund (IMF) reports disappointing adoption for Nigeria’s e-Naira, launched in October 2021. Despite initial excitement, e-Naira has only processed a modest $7.3 billion in transactions since March 2023.
This slow adoption raises questions about the future of CBDCs. Can they compete with established stablecoins, or will they struggle to gain widespread acceptance?
The current market trend suggests stablecoins, particularly USDC and USDT, are solidifying their position as facilitators of crypto transactions. Their stability and growing adoption indicate a potential long-term role within the crypto ecosystem.
Conversely, the slow uptake of e-Naira casts doubt on CBDCs’ ability to rival private stablecoins. Only time will tell if CBDCs can adapt and overcome these initial hurdles.
