The stablecoins industry has grown tremendously in recent years. Tether, already launched in 2014, will still be the largest player in that market in 2022. At the time of writing, Tether (USDT) has a market cap of $67.73 billion, while the industry’s total market cap is approximately $150.66 billion.
The stablecoin industry in pictures
Tether’s market share has dropped significantly over the years, just like that of Bitcoin. This is mainly due to the fact that a lot of competitors have joined. Where Tether was initially the only one, it now has to share the stage with dozens of competitors. However, as with Bitcoin, there are only a few stablecoins with a market cap that comes close to Tether.
Since 2020, Tether’s market cap has fallen from 88 to 48 percent. During that period, USDC increased its market cap from 10 to 32 percent, but recently it has fallen again. The gap they have left there is now being filled by the Binance USD (BUSD), which now holds 15 percent of the market.
How do stablecoins make money?
Initially, it is of course interesting for an exchange platform to have a stablecoin to absorb trading costs if people want to exchange crypto for fiat money. Furthermore, stablecoin issuers earn mainly by holding government and corporate bonds. The yield on US government bonds is currently around 4 percent, allowing stablecoin issuers to earn a decent amount.
People who hold their assets in stablecoins at an exchange often get nothing for it. The exchanges can then put these dollars in government or more risky corporate bonds and take a portion of that capital return. With this you immediately understand the risk behind these stablecoins. In any case, they are certainly not all backed by real US dollars.
