Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021

by Gordon James

Stablecoins offer an alternative to cryptocurrency as a store of value, but the market has not taken off yet. However, they do show up in unexpected places such as on Amazon and Alibaba among others—will these stablecoin giants lead to wider adoption?

The “what is a stablecoin” is a cryptocurrency that has high market liquidity, low volatility and is pegged to a fiat currency. The most popular example of this type of digital asset is the US dollar-backed Tether (USDT).

After purchasing BTC or ETH to join the realm of blockchain, the second thing most people do is purchase some Tether or USDC. Stablecoins are crucial to the blockchain’s operation because they serve as a link between the physical world and Web 3.0.

A US dollar stablecoin called USDC reportedly issued more than $42 billion in December, placing it second on the market map after USDT (Tether), which issued $78.4 billion. In the same month, the market capitalization of the decentralized stablecoin UST topped $10 billion.

Footprint Analytics – Market Cap of USDT, USDC & UST

Numerous nations have seen dangers and performed research on potential restrictions as the stablecoin business has grown dramatically. The six most significant events will be the subject of this article’s examination of what occurred to stablecoins in 2021.

1. ESD and FRAX, two algorithmic stablecoins, enter the top 10.

According to statistics from Footprint Analytics, algorithmic stablecoin ESD had a 266.7 percent increase in value from $120 million to $440 million in January while FRAX saw a 351.6 percent increase from $120 million to $140 million. By market cap, they are now the ninth and tenth largest stablecoins.

Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021Footprint Analytics –  Market Cap of ESD & FRAX

Decentralized algorithmic stablecoin Algorithmic Stablecoin ESD, sometimes referred to as Empty Set Dolla, is a synthetic asset produced by Empty Set in 2020, and it is pegged to the US dollar. In 2020, FRAX released the hybrid stablecoin protocol known as FRAX.

2. Burn Facility Shutdown Announced via Algorithmic Stablecoin Fei Protocol

When the price of the algorithmic stablecoin FEI dropped below In April, the price of ETH fell below $2,000 at the same time as the price of the algorithmic stablecoin FEI fell below $0.9. Fei Protocol should have automatically activated its burn facility to destroy Fei, which would wipe out all user funds. In order to protect the coin from being de-anchored, the project overruled the protocol’s settings and disabled the burn facility..9 in April, the price of ETH also dropped below $2,000 at the same time. Fei Protocol’s burn facility ought have have been set to automatically activate when Fei was destroyed, wiping away all user monies. The project overrode the protocol parameters and turned off the burn facility to prevent the currency from being de-anchored.

Even with the financial assistance of well-known organizations like Coinbase, FEI’s violation of the initial regulations damages its image even while it also safeguards users’ funds. According to Footprint Analytics data, we can see FEI’s market value plummeting and hundreds of millions of dollars moving out.

Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021Market Cap of FEI, Footprint Analytics

3. Cryptocurrency Pegs for Euro and Other Fiats

Stablecoins anchored by fiat currencies other than the USD, such EUR, KRW, and JPY, progressively became more prevalent in 2021.

Among the various non-dollar-anchored stablecoins, KRT, which is pegged to the Korean Won, is the most expensive, followed by EURS and SEUR, which are pegged to the euro. JYPC, the Japanese yen stablecoin, performs just a little bit over average.

Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021Other stablecoins’ market caps, according to Footprint Analytics.

El Salvador likewise intended to introduce a locally issued stablecoin by the end of 2021, but it made no more announcements. Instead, in September, it made Bitcoin legal tender.

4. Lightning Loan Attacks Affect Stablecoin Projects

The amount of assaults on the stablecoin market increased along with its growth, mostly as a result of flash loan attacks.

  • The value of the issued stablecoin, SDO, momentarily fell to zero in June after an assault on SafeDollar, a stablecoin project running on Polygon. Since then, it has rebounded, but not to the $1 anchor value.
  • A flash loan assault cost WUSD, the stablecoin of Wault Finance, a DeFi platform running on BSC, $800,000 in August. WUSD’s value dropped below $1.
  • OUSD, a stablecoin created by Origin Protocol, had a flash loan attack in November and lost $2.25 million in DAI and $1 million in ETH as a result.

Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021Footprint Analytics – Price of OUSD, WUSD & SDO

5. Nations start regulatory initiatives

The total amount of stablecoins released on Ethereum in 2021 approached 100 billion, which prompted certain nations to consider laws.

the United States

  • October: The U.S. SEC benefited by pledging powers to control stablecoins in the U.S. agency discussion on stablecoin regulation.
  • The Financial Stability Oversight Council of the United States published a study on stablecoins in November and encouraged Congress to pass legislation.
  • December: United States Hearings on stablecoin regulation were conducted by the House Financial Services Committee.

Korea, South

    • In November, Shinhan Bank announced that it was testing the creation of a stablecoin based on the Hedera Hashgraph blockchain to represent the Korean won.
    • November: A study on limits on token issuance was released by the Korea Financial Services Commission (KFSC).

Europe

  • November: The PISA framework of the European Central Bank now includes stablecoins and digital currencies.
  • Japan’s Financial Services Agency said in December that additional limitations on stablecoin issuance will take effect in 2022.

The best-managed stablecoin project for 2021 is Terra

While the stablecoin market grew quickly in 2021, Terra, which we already spoke about, stood out the most last year.

The Terra TVL reached its high for the year 2021 on December 27 at $21.09 billion, up 62.9 times from $330 million on January 1. Its native token, LUNA, likewise saw a 306.3x gain in price reaching an annual high of $199.78.

Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021TVL of Terra Footprint Analytics

Additionally, Terra introduced the KRT, a stablecoin for the Korean Won, and UST, a USD stablecoin with a market worth over $10 billion.

Conclusion

The most stablecoins ever were introduced in 2021, with more than 20. Additionally, Footprint thinks stablecoins will continue to develop their function as a cryptocurrency bridge in 2022 because to the steady growth of stablecoin transactions in 2021, the rise in demand for cross-border payments, and the function that stablecoins have for value preservation.

Additionally, investors and cryptocurrency lovers will have more alternatives than tying their assets to the US dollar, while other stablecoins, like Tether, will probably come under regulatory scrutiny.

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Date & Author: Jan 12th 2022,  [email protected]

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