Behind the market value exceeding 10 billion: the road of stable currency out of the circle
This article is from:Hashpie (ID: hashpie), Author: Lucy Cheng, forwarded with authorization.
1. Overview
Hashpie (ID: hashpie)
, Author: Lucy Cheng, forwarded with authorization.
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Since February this year, the size of the stablecoin market has shown an explosive growth trend; in the past four months, major stablecoin projects led by USDT have experienced crazy growth to varying degrees. The total market value of related currencies directly doubled in the first half of the year, jumping from 5.85 billion at the beginning of the year to a level of over US$11.5 billion; it currently occupies about 4.2% of the total market value of the entire cryptocurrency market.
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(Data source: Coin Metrics)
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2. The market value has exceeded 11.5 billion US dollars, and more than half of the newly added stablecoins have flowed into the exchange
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Market value growth of stablecoins in recent years (data source: DAppTotal)
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USDT issuance in 2020 (data source: Whalealert)
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The market capitalization of each stablecoin project in this market (data source: Stablecoin Index)
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From March 13th to March 22nd, the proportion of USDT that flowed into each exchange during that time period (data source: Beijing Lianan)
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In the first half of 2020, large USDT transfers in and out of exchanges (data source: Whalealert)
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For this reason, even if more USDT is transferred to the exchange, the final currency stock of the latter is still less than 25% of the total circulation. Similar to the situation, the exchange deposits of USDC and PAX account for less than 20% of the total circulation of related currencies.
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In the past few months, not only the total market value of stablecoins has soared, but also the total transaction volume and the number of active addresses have also risen rapidly. According to data from Coin Metrics, the number of active addresses on the stablecoin network has grown exponentially since February this year, reaching a historical peak of 2,323,690 on June 7. On the other hand, between January and May 2020, the monthly transaction volume of the stablecoin market nearly tripled from 2.65 million transactions to 6.8 million transactions. Although the indicator fell slightly in June, it is still much higher than the level at the beginning of the year.
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The trading volume of each stable currency in recent months (data source: Joel John, "State of Stablecoins - Q2 2020")
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Although the transaction volume and transaction volume on the chain have increased significantly, the transaction frequency of each stablecoin network has also increased simultaneously. Therefore, the average transaction size of stablecoin projects has not been increased, but has decreased. Take USDT, which accounts for more than 70% of the market transaction volume, as an example. The average transaction size of this stable currency decreased from $9,139 in January to $4,806 in June, a drop of nearly 48 percentage points. This downward trend shows that most of the surge in stablecoin transaction volume and market demand in recent months has come from small retail transactions.
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Not only that, but the token circulation velocity data of stablecoin projects in the first half of 2020 shows that the USDT circulation velocity, which accounts for more than 88% of the market value in this market, is the lowest, only 17.35, which is less than one-fifth of the DeFi project MarkerDAO. This means that the usage rate of USDT on the chain is not high, and most of it is used for one-time transactions or active in exchanges. However, combined with the ever-increasing decline in its monthly trading volume, the trading enthusiasm of the USDT secondary market has not improved in recent months. In the first half of the year, the transaction volume of stable currency projects led by USDT tripled, which is likely to be the result of the large number of such currencies in the over-the-counter market or other fields.
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4. USDT continues to have a negative premium, and the demand for real-world usage has increased significantly
The continuous negative premium of USDT since the beginning of this year also proves the above point of view. According to data from Coinmarketcap, except for nearly a month after the 3.12 market crash, USDT has been in a negative premium state for the past six months. Specifically, affected by the Spring Festival effect at the beginning of the year, USDT had a serious negative premium, up to -3%; this state was broken in mid-March, and USDT turned to a higher positive premium; at the same time, Tether began to Crazy additional issuance, the price of USDT quickly fell back to the negative premium level, and has continued to this day.
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In general, if there is a serious premium, there will be brick movers; for example, when the negative premium is too high, brick movers will buy USDT with RMB through the OTC platform, and then exchange it for US dollars, so as to make profits by using the price difference. It stands to reason that the USDT brick-moving party can smooth out the premium through international bank accounts, so that the negative premium will not last for too long. But what’s interesting is that USDT’s negative premium status lasted almost throughout the first half of the year.
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In theory, the negative premium of USDT will also prompt Tether to reclaim the relevant tokens and then destroy them. However, judging from the additional issuance and destruction data of the stable currency in the past few years, the relationship between the two seems to have changed slightly this year. Different from the previous situation where the difference between the amount of additional issuance and the amount of destruction was relatively small, the gap between the two has gradually widened since Q1 of 2020, and showed an opposite growth trend in Q2. Therefore, against the background of the sluggish performance of the on-site market, users' demand for USDT is still strong.
Hedging demand
In the past two years, major changes in Tether's market value have often led to large fluctuations in the prices of Bitcoin and other mainstream currencies. For example, when Bitcoin plummeted 50% from $6,000 to $3,150 in November 2018, the amount of USDT in circulation dropped by hundreds of millions of dollars; before the price of the former rose by more than 330% in 2019, Tether issued additional USDT worth hundreds of millions of dollars.
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Changes in USDT and Bitcoin exchange balances (data source: ViewBase)
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The rise and fall of the number of USDT active addresses since 2020 (data source: Glassnode)
Cross-Border Funds Transfer
Not only the investment market, but also the field of cross-border remittances has been hit hard by the epidemic. Under the influence of COVID-19 in 2020, traditional cross-border circulation channels are closed, and the demand for international fund transfers seems to show signs of overflowing into the stable currency field.
According to the information provided by Coindesk, the application of USDT in cross-border fund transfer has long been foreshadowed. In 2019, a daily transaction volume of nearly 3 million USDT was generated on Moscow's main OTC platform; at the same time, USDT ranging from 10 million to 30 million USD flowed into Chinese companies from the Moscow OTC market.
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Changes in the value transfer amount on the Bitcoin chain and the transfer amount on the USDT-ERC20 chain in 2020 (data source: Coin Metrics)
Judging from the inference that most USDT is used for one-time transactions and its on-chain value transfer volume that has gradually increased to the same level as Bitcoin this year, the on-chain activity of the stablecoin in the first half of the year is likely to come from the real world demand for cross-border remittances.
USDT-EDRC20 transaction heat map (data source: Coin Metrics)
Further, observing the USDT-ERC20 transaction heat map drawn by Coin Metrics, it can be concluded that the main market on the USDT chain is in Asia. As shown in the figure above, most of the USDT intraday transactions issued on the Ethereum chain are concentrated between 10:00 and 0:00 Beijing time, which is the opening time of Asian and European stock markets; at the same time, the red color in the figure represents high-frequency trading volume The period when the block appears corresponds to the opening time of the Asian market. And Asia happens to have a lot of countries with capital controls.
On the other hand, overseas markets have also adopted certain regulatory measures. According to the latest data on the DuneAnalytics page produced by Ethereum developer Philippe Castonguay, a total of 24 USDT addresses have been blacklisted this year, and the total amount of currency held by relevant users exceeds US$5.5 million. According to these law enforcement agencies, the stablecoin market has received attention, which is related to illegal crimes such as money laundering and running points that may be involved.
V. Summary
The so-called running sub-platform refers to the fourth-party payment, that is, through the aggregation of third-party payment platforms, cooperative banks and other service providers, illegally provide payment and settlement services to the outside world, and provide criminal gangs such as telecommunications and network fraud and online gambling. The "green channel" for bleaching illicit funds. As early as August 2019, the police in Pingdu, Shandong cracked a case involving 1.9 billion yuan of running points platform funds; and found three accounts holding a total of 2.37 million USDT in the stolen money, equivalent to About RMB 18 million.
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