2024 will be the year of stablecoin
Stablecoins are one of the most explosive growth areas in cryptocurrency. 11 trillion USD on-chain transaction volume recorded in 2022 (according to Masseri) and 5 trillion USD in the third quarter of 2023. This transaction volume is almost 10 times that of PayPal and is close to reaching payment volume of Visa. There are nearly five million blockchain addresses trading stablecoins every week.
2024 promises to be a year witnessing the strong development of stablecoins with many changes related to the market and legal environment. Let's explore the opportunities and challenges with stablecoins in 2024.
Demand for stablecoins will increase
Firstly, in terms of factors in the web3 market alone: 2024 sees some important pillars for the entire market: Bitcoin Halving and Bitcoin ETF, both of which theoretically boost the entire market. going up and attracting a large amount of liquidity into the market and will naturally cause the demand for stablecoins to increase significantly.
Second, in terms of factors outside the current web3 market: Total stablecoin market capitalization has increased to over 130 billion USD at the time of writing, driven largely by internal web3 factors such as Defi, Cryptocurrency transactions that have no (or very little) presence in real life such as money transfers, payments or buying and selling of real assets.
There are currently two big factors preventing cryptocurrency from being applied to life: Whether the current legal framework and technology are secure.
Regarding the legal environment for stablecoins, there have been important advances such as the Regulation on Markets for Cryptoassets (MiCA) in Europe or the stablecoin legal framework in Singapore, Japan, Hong Kong, and the United Kingdom.
Regarding technology, there have been important developments towards mass adoption, especially Account Abstraction - technology that provides many customizations for users and makes interacting with web3 applications easier and more friendly.
In terms of technology infrastructure, layer 2 scaling solutions have emerged globally, offering different alternatives to provide additional capabilities to improve scalability, private and cost effective. At the same time, solutions that help multi-chain interaction are also being strongly invested and developed such as LayerZero or Wormhole.
USD-pegged stablecoins will still dominate the market, but local currency-pegged stablecoins will grow
Of the current more than 130 billion, USDT and USDC alone account for more than 110 billion in USD value, this trend will continue in 2024 thanks to the global influence of the USD in international payments and the high interest rate environment. of USD. Users in countries with high inflation and devalued local currencies will want to hold USD or other stable currencies.
Up to now, the most significant step forward in bridging the gap between traditional finance and decentralized finance is probably Grab integrating USDC and Visa testing USDC.
In the future as cryptocurrencies become increasingly integrated into traditional finance and used in everyday life, driving greater acceptance and adoption of cryptocurrencies, demand for anchored stablecoins will follow. The local currency is likely to increase accordingly. This is expected to take place in a more "exciting" way with mass-issued CBDCs, when 98 central banks representing 98% of global GDP have activities to initiate CBDCs.
Although there are opinions that the official launch of CBDCs will be the beginning of the end of stablecoins, many experts and politicians agree with the view that CBDCs and stablecoins can coexist. This content will be provided in subsequent articles.
The Messari platform recently released the report "Crypto Theses 2024", which outlines trends, individuals, organizations and projects to monitor, and makes predictions in 2024. In the 193 pages of the article Writing, Masseri devoted eight pages from pages 66 to 73 to commenting on stablecoins and making the case that an ideal portfolio is not 20-40-20-20 including cash, stocks, commodities , bonds) which should be 40-40-20 (interest-bearing stablecoin, stock, crypto)
Sean Stein Smith - Lehman College professor and member of the Advisory Council of the Wall Street Blockchain Alliance also had an article published on Forbes, talking about 3 reasons stablecoins will have a breakthrough year in 2024, including:
- Stablecoins have clear business applications:
The majority of payments, including US dollars, already take place virtually, so the rise of cryptocurrency transactions – many of which are backed by USD – is logical. physical. Efficiency, low costs, and the modernization of the US dollar are strong tailwinds that appear to continue to support stablecoin popularity.
- The tendency to hold low volatility assets will increase
Following the volatility that many crypto assets have experienced over the past few years, the appeal and interest in lower volatility crypto assets continues to grow.
At the same time, the push for a bitcoin spot ETF has also increased, indicating interest in low-volatility crypto assets, driven by the fact that larger institutional inflows will result in fewer more volatile over time
- Stablecoins represent the leadership of the USD
With over 90% of all stablecoin transactions taking place in USD-pegged tokens, the United States stands to benefit from increased stablecoin adoption, even if some regulators are slow to recognize the benefits that these types Other cryptocurrencies may yield.
2024 opens up new opportunities for stablecoins in general and VNST in particular. In particular, the potential for cryptocurrency to be widely applied to Vietnamese users will create a launching pad for VNST in the journey of providing safe, stable and convenient financial solutions for users.