Daily market cap history of the 10 largest stablecoins up until June 19, 2022

The market cap of the top 10 stablecoin initially muliplied over time, reaching a combined value of over 160 billion USD in March - before declining. Note this value does not include TerraUSD (UST), the algorithmic stablecoin tied to the LUNA crypto which declined severely in May 2022. Up until then, estimates reveal that the market cap had more than tripled within five months - likely in the wake of growing interest worldwide in cryptocurrencies, after sudden price spikes in a coin like Dogecoin (DOGE).

Stability above all, or what does a stablecoin do?

Stablecoins are cryptocurrencies - like the commonly known Bitcoin (BTC) and Ethereum (ETH) - but their value is determined in a different way. Whilst the price of Bitcoin mainly follows supply - how many coins are being mined or are available to purchase - and demand - how many investors want buy the coin - stablecoins are synthetically connected to the price of an altogether different asset. Tether's USDT, for instance, is connected to the price development of the U.S. dollar (USD): if the U.S. dollar falls in the FX market, so does the USDT. Compare this to the "regular" price history of a cryptocurrency like Ripple (XRP) and stablecoins reveal themselves to be a relatively less volatile digital currency to either use or invest in that their counterparts in the free market.

A test ground for digital payments

This stability of these particular cryptocurrencies is important for two areas in digital payments that do not prefer volality. For instance, these coins are a popular choice within the world of Decentralized Finance or DeFi - an online financial market without the supervision of central bank that relies on cryptocurrencies for payments and loans. Because of that reliance, it is a market that can rapidly change in size due to price fluctuations or changing transaction fees of certain cryptocurrencies - something that is less likely to occur when using stablecoins. Additionally, stablecoins are seen as the inspiration for so-called CBDC or Central Bank Digital Currencies - such as China's e-CNY currency or the "digital euro" that is being researched in the EU-27. In terms of how advanced countries worldwide are into researching their own cryptocurrency, China ranked third in 2020, behind Cambodia, and The Bahamas.