The New Order of Stablecoins: Market, Technology, and Sovereignty Struggle

Preface

Stablecoins, as a core component connecting traditional finance and the crypto asset ecosystem, are strategically rising in importance. From the earliest centralized custody models to the current stablecoins issued by protocols themselves and driven by on-chain synthesis and algorithmic mechanisms, the market structure has fundamentally changed.

At the same time, the demand for stablecoins in DeFi, RWA, LSD, and even L2 networks is rapidly expanding, further promoting the formation of a new pattern of coexistence, competition, and collaboration among various models.

This is no longer a simple market segmentation issue, but a deep competition concerning the "future forms of digital currency" and "on-chain settlement standards." This report focuses on the main trends and structural characteristics of the current stablecoin market, systematically sorting through the operating mechanisms, market performance, on-chain activity, and policy environment of mainstream projects, to aid in effectively understanding the evolution trends and future competitive landscape of stablecoins.

Stablecoin Market Trends

Global stablecoin total market value and growth trend

As of May 26, 2025, the total market capitalization of global stablecoins has surged to approximately $246.38 billion, increasing by around 4927.64% from about $5 billion in 2019, demonstrating explosive growth. This trend not only highlights the rapid expansion of stablecoins within the cryptocurrency ecosystem but also underscores their increasingly irreplaceable position in fields such as payments, trading, and decentralized finance.

In 2025, the stablecoin market continues to experience rapid growth, with a 78.02% increase compared to the market capitalization of 138.4 billion USD in 2023. It currently accounts for 7.04% of the total cryptocurrency market capitalization, further solidifying its core market position.

Recent Growth Drivers

Macroeconomic financial environment:

Amidst the increasing global inflationary pressures and turmoil in financial markets, the demand for "on-chain cash" has significantly risen among investors. The U.S. Treasury has defined stablecoins as "on-chain cash," providing policy logic support for their absorption of traditional capital. At the same time, during the severe fluctuations of crypto assets, stablecoins are also seen as a safe haven.

Technological advancements and cost advantages:

Some efficient public chains represented by Tron have significantly reduced transaction costs, with almost zero fees for USDT transfers on the Tron chain, attracting a large number of trading users. High-throughput blockchains like Solana also promote the expansion of stablecoin use cases due to their high speed and low fee characteristics.

Institution adopts enhancement:

In 2024, BlackRock will issue a BUIDL tokenized fund settled in USDC, aimed at exploring the on-chain integration of assets such as bonds and real estate, highlighting the importance of stablecoins in institutional-level settlement. According to OKG Research's calculations: under an optimistic scenario where global compliance frameworks gradually unfold and institutions and individuals widely adopt them, the global supply of stablecoins is expected to reach $3 trillion by 2030, with monthly on-chain transaction volumes hitting $9 trillion, and annual transaction totals potentially exceeding $100 trillion. This means that stablecoins will not only stand alongside traditional electronic payment systems but will also occupy a structurally foundational position in the global settlement network. In terms of market capitalization, stablecoins will become the "fourth category of base monetary assets" following government bonds, cash, and bank deposits, serving as an important medium for digital payments and asset circulation.

DeFi demand driven:

Citibank pointed out that stablecoins are the "main entry point" for DeFi, and their low volatility characteristics make them the preferred choice for value storage and trading. A Chainalysis report shows that stablecoins account for more than two-thirds of on-chain trading volume, widely used in scenarios such as lending, DEX liquidity provision, and mining. In 2024, a leading DeFi protocol's TVL grew by about 30%, with USDC and DAI as the main trading pairs. After the 2024 U.S. elections, the market value of stablecoins increased by 25 billion USD, further validating their core role in DeFi scenarios.

Stablecoin Market Structure and Competitive Landscape

Market Concentration and Overall Structure

Currently, the stablecoin market is highly concentrated, with Tether's market capitalization reaching $150.335 billion, accounting for 61.27%; USD Coin's market capitalization is $60.822 billion, accounting for 24.79%. Together, the market share of the two reaches 86.06%, forming a dual oligopoly.

Nevertheless, emerging stablecoins are gradually rising to challenge the dominant position. For example, USDE launched by Ethena Labs grew from $146 million at the beginning of 2024 to $4.889 billion, an increase of over 334 times, making it the fastest-growing stablecoin. In addition, USD1 and USD0 also show good market expansion trends, but in the short term, they are still insufficient to shake the dominance of USDT and USDC.

Competitive Landscape Analysis

Market competition mainly unfolds among three types of stablecoins:

Fiat-collateralized stablecoins: USDT and USDC are backed by USD reserves, enjoying advantages in centralized exchanges and traditional finance due to transparency and compliance. For example, USDT added $30 billion in market capitalization in 2024, demonstrating its market trust.

Decentralized Stablecoin: USDE, through the synthetic dollar mechanism and native yield model, is expected to become a popular trading pair on a certain DEX in 2024, with its locked value growing by 50%, rapidly rising in the DeFi ecosystem; while DAI, relying on the decentralized governance of MakerDAO, attracts DeFi users but is smaller in scale, only 3.631 billion USD.

Emerging stablecoins: USD1 rapidly expanded to $2.133 billion through institutional endorsement; USD0 attracted users with DeFi incentive mechanisms, reaching a market value of $641 million.

Others: The collapse of TerraUSD in 2022 led to a trust crisis in algorithmic stablecoins, prompting the market to shift towards more transparent fiat-collateralized stablecoins, and USDC's market share grew by about 10% between 2023 and 2024.

The rise logic of USDE ###

USDE is a synthetic dollar stablecoin based on Ethereum, developed by Ethena Labs, using staked Ethereum as collateral and employing a delta-neutral hedging strategy to maintain its peg to the US dollar. Its rapid growth can be attributed to the following factors:

Innovative earning mechanism

USDE provides high returns for holders through the "Internet Bond" feature, sourced from the staking yields of stETH and the funding rate spread in the perpetual contract market. This high-yield model attracts a large number of DeFi users and institutional investors, especially in a low-interest-rate environment where traditional financial products struggle to offer similar returns.

Deep integration of the DeFi ecosystem

The widespread support of USDE on DeFi platforms makes it one of the preferred stablecoins for DeFi users. Users can easily trade, provide liquidity, or participate in lending without worrying about price fluctuations. Data shows that the locked amount of USDE on a certain DEX has increased by 50%, reflecting its important position in the DeFi ecosystem.

decentralized and anti-censorship features

As a stablecoin completely based on crypto assets, USDE does not rely on traditional financial systems, which has significant appeal among users pursuing decentralization, especially in regions where traditional financial services are limited or restricted.

The growth of market demand

With the expansion of the DeFi and cryptocurrency ecosystem, the demand for stablecoins continues to grow. USDE, as an innovative and fully decentralized stablecoin, meets the market's demand for new stablecoin solutions.

Institutional support and collaboration

Ethena Labs' collaboration with renowned crypto investment institutions and exchanges has enhanced market confidence and liquidity for USDE.

Marketing and Community Engagement

Ethena Labs has quickly attracted the attention of users and developers through effective marketing strategies and community incentive programs, promoting the adoption of USDE.

The Challenges of Emerging Stablecoins

USD1: Issued by World Liberty Financial, USD1 has a market capitalization of $2.133 billion, ranking 7th. Its market cap surged from $128 million to $2.133 billion in just one week, showing rapid growth.

WLFI is associated with the Trump family and has received a $200 million investment from a certain exchange and MGX, enhancing institutional backing. The New Money report indicates that USD1 has been chosen as the settlement currency for significant transactions, such as the collaboration projects with the Pakistani government, further increasing its market influence.

USD1 is rapidly expanding through exclusive agreements and institutional adoption, but its political background may raise regulatory risks.

USD0: USD0 issued by the Usual platform has a market cap of 641 million USD, ranking 12th. The Usual Blog introduces that it attracts users through the USUAL token incentive mechanism, allowing holders to participate in governance and share the platform's profits.

USD0 combines the low volatility of stablecoins with the yield potential of DeFi, attracting users who focus on decentralized innovation.

The unique positioning of USD0 in the DeFi ecosystem brings growth potential, but it needs to enhance market awareness and liquidity.

Emerging stablecoins challenge the market through differentiated strategies, but it is difficult to shake the dominance of USDT and USDC in the short term.

Mainstream Stablecoin Analysis and Comparison

This section systematically analyzes and compares the top five mainstream stablecoins by market capitalization from the perspectives of mechanism structure, asset support types, liquidity and application scenarios, and risk points.

Liquidity and Trading Pair Distribution

The liquidity of mainstream stablecoins such as USDT and USDC is extremely abundant, with deep trading pairs available on the vast majority of major exchanges and decentralized trading platforms. They almost cover all major public chains: USDT/USDC can be traded on Ethereum, Tron, Solana, BSC, Polygon, and other chains; meanwhile, emerging stablecoins initially launched on specific public chains and some centralized exchanges. The Tron network recently introduced zero fees for USDT, further increasing the trading volume and liquidity of USDT on that chain. Overall, USDT and USDC are the most globally liquid stablecoins, while the liquidity of other stablecoins is concentrated in specific ecosystems and exchanges.

Reserve Transparency

Reserve transparency is a key factor in assessing the credibility of stablecoins. Below is a detailed analysis of the reserve transparency of various stablecoins:

USDT:

Reserve situation: Claimed to be supported by cash, bank deposits, short-term government bonds, and other assets.

Transparency: Quarterly reserve reports are released, but have long been questioned. Some reports show a complex reserve structure, and certain assets are difficult to verify. For instance, in 2023, Tether was accused of including commercial paper in its reserves, raising concerns in the market.

Risk: Historically, there have been multiple regulatory investigations due to issues with reserve transparency, such as the investigation by the New York Attorney General's Office in 2021.

USDC:

Reserve situation: Supported by cash and short-term U.S. Treasury bonds, reserve assets are held in regulated financial institutions such as JPMorgan Chase and Citibank.

Transparency: Monthly reserve reports audited by Grant Thornton are published, ensuring high transparency and strong market trust. For example, the report in May 2025 showed total reserves exceeding $60 billion, all in cash and government bonds.

Risk: Dependence on traditional financial systems, affected by macroeconomic and regulatory policies.

USDE:

Reserve Status: Synthetic USD, backed by stETH as collateral, and maintaining value through a delta-neutral hedging strategy via DeFi protocols.

Transparency: Fully based on blockchain, reserves and mechanisms are transparent, allowing users to verify on the DeFi platform. For example, in May 2025, the collateral assets of USDE were publicly available on-chain, showing that the stETH collateralization rate exceeded 150%.

Risk: Dependence on the stability of the DeFi ecosystem, market fluctuations may affect its value.

DAI:

Reserve situation: Collateralized by various crypto assets, supporting decentralized governance, the current collateralization ratio is usually maintained at over 150%.

Transparency: All collateral assets and collateral ratios are publicly available on the MakerDAO dashboard and can be viewed in real-time. For example, in May 2025, the collateral ratio of ETH is approximately 60%, and USDC is 30%.

Risk: Dependence on the price stability of crypto assets, historically affected by ETH price fluctuations.