The supply of stablecoins, a type of cryptocurrency typically pegged to the U.S. dollar, has been increasing in U.S. dollar terms, but this growth does not signify that stablecoins are taking over the cryptocurrency market. Instead, it reflects the overall rise in the total market capitalization of digital assets, according to a research report released by JPMorgan (JPM) on Wednesday.
Stablecoins, often tied to the U.S. dollar but sometimes linked to other currencies or assets like gold, have shown little change in their market share as a percentage of the total crypto market cap, noted analysts led by Nikolaos Panigirtzoglou.
The report highlighted that the total stablecoin market capitalization has bounced back to $165 billion, approaching the previous peak of $180 billion observed before the Terra/Luna collapse.
Several factors have contributed to this growth in the stablecoin market.
This year’s significant price increases in major cryptocurrencies like bitcoin (BTC) and ether (ETH) have driven up the overall crypto market cap, which in turn has fueled the growth of stablecoin supply. These tokens are commonly used as collateral in crypto lending, borrowing, and other transactions, the report explained.
Moreover, stablecoins have gained popularity among investors seeking access to crypto markets, particularly after the launch of spot bitcoin exchange-traded funds (ETFs) in the U.S. earlier this year. The traditional finance sector has also shown increased demand for these cryptocurrencies.
Additionally, the introduction of new stablecoin issuers and products, such as Ethena’s USDe, has further boosted the market, the bank observed.
JPMorgan also pointed out that regulatory clarity in Europe, following the implementation of the Markets in Crypto-Assets (MiCA) legislation on July 1, has drawn more investors to the stablecoin sector.
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