ASSET-BACKED COINS2024 LANDSCAPE

What is an asset-backed coin?

These are coins backed by a tangible asset or its value. An obvious example is USDT, a coin pegged to the value of the US dollar. Such assets are traditionally referred to as stablecoins. However, coins can be pegged to any traded asset, such as gold or stocks. 

In this article, we will describe the asset-backed market according to the following assets: 

• Fiat currencies;
• Other cryptocurrencies;
• Metals.

Stablecoin Market General Information

The total capitalization of the stablecoin market is $166 billion, with a projected CAGR of 7%.

Such assets are essential in ensuring stability and predictability in the cryptocurrency market. Due to their connection to real currencies and metals, they reduce volatility, which makes them attractive to investors looking for reliable instruments for capital preservation and payments. Given the market's projected growth of 7% per year, we expect to see a further increase in the capitalization of stablecoins. Increased interest in such assets may stimulate the development of new projects.

As the number of projects on the market increases, competition will grow, which may stimulate issuers to develop their products: fee reductions, better user service, and the introduction of new asset management platforms.

The stablecoin market is currently dominated by coins pegged to fiat currencies, particularly the US dollar. This reflects the high confidence level in the dollar as the global reserve currency and its popularity as the basis for stablecoins. 

If the U.S. dollar loses its status as the primary reserve currency, the market could rise by 15% due to increased investor interest in other stablecoins.

– The information is relevant to July 2024.

STABLECOIN MARKET

The total capitalization of the stablecoin market can be estimated at $166 billion, with an annual growth prospect of 7%.

Examining the chart below, it becomes clear that 95% of market capitalization comprises coins pegged to fiat assets (mainly the US dollar). 4% are pegged to other cryptocurrencies, and no more than 1% of assets are pegged to metals. 

– The information is relevant to July 2024.

The market is dominated by stablecoins pegged to the US dollar. Ethereum is the preferred choice for cryptocurrency-backed assets, and gold leads the way among metals.

The average deviation rate can reach -5%. Currency-backed assets show minimal deviation, averaging -0.004%. For cryptocurrency-backed assets, the deviation is -3%. Metal-backed assets have the most significant deviation, averaging -11%.

The stablecoins with minimal deviation over 12 months are Binance-Peg Cardano (-0.001%) and XDAI-USD (-0.005%). In terms of price stability, USDT ranks 24th (+0.07%).

The peg provision depends on the coin's economics. Some coins are formed from the issuing company's direct reserves. Such reserves may include dollars invested in US debt bonds (for USD-stablecoins) or fiat currency, stocks, and other assets in banking institutions, etc.

Standard algorithms for managing stablecoins ensure price stability by dynamically adjusting the coin's supply based on market valuation. If the price of a stablecoin falls below a set level, the algorithm reduces the number of stablecoins to be issued. If the price rises above the target level, the algorithm increases the supply. This allows the algorithm to maintain a stable price that does not depend on market volatility. Such models may have their own regulation and management features.

– The information is relevant to July 2024.

Market Assets Analysis

Market Overview

Capitalization of stablecoins pegged to USD and EUR accounts for 99% of the currency coin market. We have analyzed 229 currency assets; 202 are pegged to the USD and EUR, with the majority (181 projects) focused on USD. 

USD

Tether (USDT) remains the leader, with a $112 billion market capitalization, indicating a direct dominance over other stablecoins. USDT has a stable deviation from the USD of +0.04%. USDT is followed by USD Coin (USDC), with a market capitalization of $32 billion and a minimum deviation of +0.001%. 

EUR

Assets pegged to the euro have a share of up to 0.08% of the currency-backed stablecoins market. STASIS EURS has the largest market capitalization of $134 million and a daily trading volume of over $1 million, showing relative stability with a -0.1% deviation from EUR. EUR-stablecoin projects from TETHER show large +2% deviations, which may indicate fluctuations in supply and demand. The difference with the attached asset in the case of EUR coins is always smaller than that of USD coins. This shows a growing interest in diversifying offerings in the EUR-stablecoin segment among investors looking for stability and new opportunities in European currencies. 

Other currencies

Alternative stablecoins have a total capitalization of $106 million. XSGD is the leader; it is pegged to the Singapore dollar and has a capitalization of $30 million. Such assets are characterized by large deviations from the pegged asset, averaging 1%. 

Cryptocurrency-Backed Stablecoin Market

Market Overview

At least 100 cryptocurrency-backed coins are listed on major platforms. Such coins offer a more comfortable interaction with pegged assets. For example, it is easier to have a coin pegged to Ethereum and pay a lower fee for the transaction of these funds than using Ethereum.

The total capitalization of such assets currently exceeds $7 billion. 88% are Ethereum coins (6 assets), 9% are Bitcoin (9 coins), and 5% are other cryptocurrencies (85 coins). 

Ethereum

The largest Ethereum-backed coin is DAI, which has a capitalization of over $5 billion and a monthly trading volume of $357 million. These figures are significantly higher than those for other assets. In the case of DAI, the deviation from the ETH reaches +0.03%. 

Bitcoin

TBTC is currently the largest in trading volume ($2 million) and capitalization ($219 million). The average deviation of TBTC's value from Bitcoin is +0.3%, which is much smaller compared to other coins.

Metal-Backed Stablecoin Market

Market Overview

The largest coins pegged to gold are Tether Gold and PAX Gold, with market capitalizations of $574 million and $431 million. They represent 95% of the current metal-backed coin market, with deviations of +0.1% and +0.2%. Other coins exhibit a more significant deviation from the value of connected assets. (5% to 94%).

Conclusion

The stablecoin market has a total capitalization of $166 billion and a projected annual growth rate of 7%. Most of the market (95%) consists of stablecoins pegged to fiat currencies, primarily the U.S. dollar. 

Tether (USDT) remains the leader among dollar-pegged stablecoins, with over $112 billion in capitalization. In the following article, we will assess the stability of stablecoins.