The volume of stablecoins on Ethereum has dwarfed the volume of the network’s native cryptocurrency ETH. According to research by Messari, the gap between the volume of ether and the volume of stablecoins has widened significantly after Tether (USDT) migrated to Ethereum in the second quarter of 2019.
Move over ether, stablecoins are now running the Ethereum show
Ether (ETH) is the second largest cryptocurrency in the world by market capitalization, but not the most popular cryptocurrency in its own network. ETH, once the dominant force on the Ethereum blockchain, is slowly but surely being replaced by less volatile and more efficient assets.
According to the latest research by Messari Crypto, the Ethereum economy is now absolutely dominated by stablecoins. Ryan Watkins, research analyst at Messari, said the gap between the ETH transfer value and the stablecoin transfer value began to widen in mid-2019. The difference between the two, he noted, has only increased since then.
Graph showing the weekly adjusted transfer value for ETH and other ERC20 stablecoins in 2019. (Source: Messari)
Messari’s data also showed that the twelve-month transfer volume for ETH has dropped from a staggering $ 430 billion to just over $ 150 billion over the course of the past year. The stablecoin value, on the other hand, has seen a significant increase in the same period.
Graphic showing the adjusted transfer volume for the last 12 months for ETH and ERC20 stablecoins. (Source: Messari)
Several factors could explain why stablecoins dominate the Ethereum network
While ERC20 stablecoins have grown in popularity over the past two years, their transfer volume only began when Tether (USDT) began migrating its coins to the Ethereum blockchain.
USDT is by far the most popular stablecoin in the crypto market and a perfect answer to the volatility of the market for institutional investors looking for an easy crypto climb. This is one of the factors that contribute to his almost incredible daily volume. Its $ 4.2 billion market cap pales in comparison to its 24-hour trading volume, which most crypto trackers estimate at $ 40 billion to $ 64 billion.
Another thing that could have had a significant impact on the stablecoin dominance of the Ethereum network is the rise of DeFi. With Ethereum being one of the most popular platforms for building dApps, it is only natural that most of them who work in finance would find their home on the blockchain.
Data from DeFi Pulse showed that the total USD value locked in DeFi has increased from $ 274 million to nearly $ 900 million since January 1, 2019. MakerDAO and its ERC20 stablecoin Dai are responsible for almost 60 percent of that.
Chart showing total USD value locked in DeFi dApps. (Source: DeFi Pulse)
Messari’s data offered an interesting perspective on the current state of the Ethereum network. While some saw this as evidence that ETH was becoming increasingly redundant, others argued that the lack of movement in the world’s second largest cryptocurrency was an extremely bullish indicator.
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