Research Summary
The report provides an in-depth analysis of the stablecoin market, focusing on USDT, USDC, DAI, and FRAX. It discusses the market dominance of these stablecoins, their transfer volumes, and their impact on the crypto market. The report also highlights the performance of MakerDAO and Frax Finance.
Key Takeaways
Stablecoin Market Overview
- USDT Dominance: Tether (USDT) has shown a significant increase in market cap, rising over 41% from $68.2B to $96.2B. It dominates the stablecoin market, accounting for 75% to 85% of weekly activity.
- USDC Market Cap Decline: USDC, on the other hand, has seen a decline in market cap from $41.5B to $27.73B. However, it has shown growth in wallet activity, rising from around 10% to about 20%.
- Stablecoin Transfer Volume: The transfer volume of stablecoins has seen a notable uptick, reaching a peak of $372 billion in January 2024 from $240 billion in November 2023.
MakerDAO’s Performance
- Record Annualized Revenues: MakerDAO saw record annualized revenues in 2023, thanks to its real-world asset (RWA) vaults – Clydesdale and Andromeda – which deployed the protocol’s assets into short duration US treasuries.
- Reduced Stablecoin Exposure: MakerDAO has significantly reduced its stablecoin exposure from 85% to 8%, shifting the majority of collateral to US Treasury Bills (41%), ETH (27%), and lending protocols like Spark (14%).
Frax Finance’s Performance
- FRAX Supply Drop: The supply of FRAX, a dollar-pegged stablecoin, has dropped over 77% to $649.4M from a high of $2.9B in March 2022. However, the stablecoin has made significant gains in DAO treasures and externally owned accounts.
- Non-Dollar Pegged Assets: Frax has developed two stable assets not pegged to the US dollar — FPI and frxETH, which have grown to a market capitalization of $84.5M and $772M respectively.
Actionable Insights
- Monitor Stablecoin Market Trends: Given the dominance of USDT and the growing activity of USDC, it’s crucial to keep an eye on these stablecoins’ market trends for potential impacts on the broader crypto market.
- Assess MakerDAO’s Strategy: MakerDAO’s successful strategy of reducing stablecoin exposure and diversifying into real-world assets and other cryptocurrencies could serve as a model for other DeFi protocols.
- Explore Frax’s Non-Dollar Pegged Assets: The growth of Frax’s non-dollar pegged assets, FPI and frxETH, indicates a potential trend towards diversification in the stablecoin market. These assets could be worth exploring for their potential impact on the crypto market.
