Stablecoin Market Hits $160 Billion for First Time Since Terra Collapse as USDe and FDUSD Lead the Way

Key Takeaways

• The total market cap of stablecoins rebounded, mirroring levels seen before Terra’s UST collapse.
• Several stablecoins, including USDe and FDUSD have seen significant supply increases in the past month.
• Terra’s crash serves as a cautionary tale.

This week, the market cap of the fiat-pegged cryptocurrency economy reached $160 billion , a level last seen in May 2022, just before the collapse of Terra’s UST, which lost its $1 parity on May 9, 2022.

Over the past month, several stablecoins have seen their supplies increase, with Ethena’s USDe and First Digital’s FDUSD leading the way. The former showed a supply surge of about 86.8%.

Stablecoins on the Rise: Market Up $28 Billion in a Month

Since December 30, 2023, the stablecoin market has expanded significantly, growing by $28.63 billion. It surged from the $150 billion mark to $160.03 billion in just over a month, driven by increases in the supply of numerous dollar-pegged coins.

Tether (USDT), the largest of these, now boasts a market valuation of $109.9 billion with a circulating supply of 109.84 billion USDT, marking a 5.6% growth in supply over the past month.

Circle’s USD Coin (USDC), the second-largest fiat-pegged token, saw a 6.4% increase in its supply over the past month, pushing its market cap slightly over the $34 billion mark. Together, USDT and USDC account for over 93% of the total value of the stablecoin market. Additionally, Makerdao’s DAI experienced a 9.3% rise in supply last month, elevating its market cap to $5.2 billion.

Ethena’s USDE Leads 86.8% Surge

First Digital’s FDUSD now holds a market valuation of $3.74 billion, having increased by 43% over the past 30 days. Ethena’s USDe, which came out less than six months ago, leads in growth among the top stablecoins. USDe saw an 86.8% increase in supply, bringing its market valuation to approximately $2.37 billion as of April 22, 2024.

Together, these five stablecoins—Tether (USDT), USD Coin (USDC), Makerdao’s DAI, FDUSD, and USDe—make up 96.98% of the stablecoin market, collectively accounting for $155.21 billion of the total $160.03 billion market value.

The substantial growth in the stablecoin market highlights increasing confidence in fiat-pegged crypto assets as they reach new milestones.

Terra Fiasco: UST Depegs, LUNA Crashes 96% in a Day

Terra’s crisis began on May 8 2022. Then, its UST stablecoin plummeted to $0.985 after substantial sell-offs on Terra’s lending protocol Anchor and the stablecoin exchange Curve. This drop ignited widespread fear that UST might completely lose its $1 peg. As a result, uncertainty spread throughout the cryptocurrency community.

In response, Terraform Labs CEO Do Kwon made light of the depegging risks. This comment that would soon see an ironic fulfillment as UST continued fall. Kwon tried to reassure the Terra community by announcing that more capital was being deployed to restore UST’s peg. However, the situation worsened rapidly, with the total value locked in Terra’s Anchor falling by $11 billion in just two days.

While Terraform exhausted nearly all its BTC reserves in a failed attempt to stabilize UST, its LUNA token, which had previously been in the top 10 cryptocurrencies by market cap, collapsed 96% in a single day. Over the following five days, both LUNA and UST drastically lost value in a swift downward spiral.