Kaiko Research Report Analysis of Market Structure and Current Situation of Five Major Stablecoins

Source: Kaiko

Translation: LianGuaiBitpushNews Mary Liu

Stablecoins play a crucial role in the cryptocurrency market, so even the slightest decoupling can lead to widespread market contagion. Therefore, since early 2023, the volatility of stablecoins has been particularly worrying: TUSD experienced volatility during the closure of Prime Trust, USDT decoupled due to mysterious sell-off activities, the volatility of BUSD has increased since LianGuaixos stopped issuing, and USDC narrowly avoided anchoring during the banking crisis in March.

Although each stablecoin has its own reasons for volatility, this volatility highlights a bigger issue: the cryptocurrency market heavily relies on centralized stablecoins, which often lack transparency in reserves. Despite the regulatory measures soon to be introduced in the European region to regulate the unstable stablecoin market, there is still a long way to go. This article will explore the state of the stablecoin market structure to gain a deeper understanding of the current risks, with a focus on the top five stablecoins by market capitalization: USDT, USDC, BUSD, TUSD, and DAI.

Stablecoin Market Structure

Currently, stablecoins are involved in 74% of cryptocurrency trades on centralized exchanges, a 10% increase since early 2020, but far below the all-time high set in March when stablecoins were involved in 87% of cryptocurrency trades. The rapid growth of stablecoin market share is closely related to Binance’s zero-fee trading promotion.

After Binance discontinued the promotion, we observed an almost instantaneous decrease in stablecoin market share. However, overall, data shows that fiat currencies play a relatively small role in the global cryptocurrency market, accounting for only 23% of market share.

To understand the actual scale of these markets, let’s take a look at the trading volumes of the top five stablecoins on centralized and decentralized exchanges: Tether (USDT), USDC, Binance USD (BUSD), TrueUSD (TUSD), and DAI.

Since the beginning of the second quarter, the daily trading volume of these five stablecoins has been around 10-15 billion US dollars. Although this is far from the historical peak set during the bull market in 2021, the trading volume is still quite significant.

From another perspective, the cumulative trading volume of stablecoins in 2023 will exceed 3 trillion US dollars, with Tether taking the lead.

Today, Tether holds up to 70% of the market share in centralized exchanges. Before its issuer, LianGuaixos, was forced to suspend earlier this year, BUSD from Binance almost became the top competitor. The market share of BUSD is currently slowly declining, from a high of 30% to the current 6% before officially ending in 2024.

Perhaps the biggest surprise this year is the rapid rise of TUSD, whose market share has climbed from less than 1% to 19% in just three months. TUSD used to be an unknown stablecoin with almost no trading volume before Binance chose it as the successor to BUSD and started promoting the zero-fee BTC-TUSD currency pair. The majority of TUSD trading volume comes from this currency pair.

In decentralized exchanges, the market share breakdown is quite different. The most obvious trend is the rapid decline of DAI, the only decentralized top-tier stablecoin. DAI used to dominate most of the DeFi activities, but its leading position was quickly replaced by USDC and USDT.

One explanation for this shift involves the relative capital efficiency of each stablecoin: DAI requires over-collateralization to mint $1 worth of DAI, whereas USDC and USDT do not, allowing these centralized stablecoins to quickly attract more users and capital. Today, USDC systematically appears in DeFi protocols, especially in lending protocols, where it accounts for a high proportion of total collateral.

In general, the majority of stablecoin activity today occurs on centralized exchanges. Only 5% of stablecoin trades are executed on decentralized exchanges, although this number briefly surged to 45% during the banking crisis in March (Kaiko’s DEX data includes the most liquid protocols on the Ethereum mainnet, which currently account for the majority of cross-chain trading volume).

The ratio of trading volume between CEX and DEX indicates that stablecoins are mainly used for trading on centralized exchanges.


Based on this information, we can draw the following conclusions about the structure of the stablecoin market:

  • The majority of crypto activities involve centralized stablecoins rather than fiat currencies.

  • Although TUSD is rapidly expanding its market share, Tether still dominates these transactions.

  • The primary use case for stablecoins is trading on centralized exchanges.

Recently, the European Banking Authority notified stablecoin issuers that they must take immediate action to comply with the upcoming MiCA regulations, considering the widespread lack of transparency and governance that puts several stablecoins in an unstable position. Despite Circle’s significant efforts to increase transparency for USDC (even Tether has made some efforts in the past year), TUSD, which is relatively less known, now brings the greatest risk by providing the least amount of information about its reserves or company structure.

Although TUSD is not a systematically important stablecoin, Binance is an influential exchange, so any activity on it should be scrutinized. However, historically, transparency has never seemed to be a major concern for stablecoin users unless there is a complete ban implemented or regulatory bodies coordinate legislation in each major region. Similar market structures may continue to exist.

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