November 13, 2023: The Stablecoin Soiree 💰🎭

Stablecoin markets remain anything but stable

Congrats to Napier Finance, which announced a $1MM raise from the flywheel!

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For more adventures in forecasting the future…

Hope you were paying attention…

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Stablecoins

Is the bull market wagging $crvUSD? Or is $crvUSD wagging the bull market?

Either way, $crvUSD just keeps ripping all time highs…

The $crvUSD renaissance has also been spread among an ever-growing userbase.

As the token continues its growth, it’s moving out of its novelty phase and beginning to mature into grown-up territory.

Here is the absolute state of stablecoins holding over $100MM market cap, as we approach the end of AD 2023:

As you can see, as $crvUSD passes the smoldering remains of Terra’s $UST, it’s falling into a special tier. In the bull market, notching a billy was hardly an accomplishment. Through the interminable grind of the bear market, just five stablecoins remain bearing this distinction, (and with $BUSD slated for extinction, likely just four soon).

As always, the world of stablecoins remains anything but stable. Just ten stablecoins fall into this tier of nine figure TVL. We presume they all hold ambitions to enter (or re-enter) the billion dollar club. This list is a crazy mix, a few newbies rising fast amidst a variety of veterans continuing to bleed a few percent off their market cap each month.

Most stablecoins within this tier are very centralized. Centralized stablecoins have the benefit of sidling up closer to the magic money printer. It makes sense, as a few hundred million dollars in the world of TradFi is akin to a rounding error. The challenge they face is legal obstacles thrown up by Uncle Sam.

PayPal USD exemplifies these issues — it’s grown at nearly the same pace as $crvUSD despite scarce attention to its onchain presence. So much money moves through PayPal that they could easily have notched a few hundred million market cap simply just from confused retail users accidentally misclicking through their app.

At any rate, PayPal’s immediate challenge is not so much surviving onchain but offchain. The fix is already in…

The other centralized stablecoins within this tier already find themselves mired in legal headwinds. PayPal’s stablecoin is issued by Paxos, which itself already saw itself on the regulatory end of the stick for issuing the $BUSD stablecoin.

Meanwhile, Gemini’s $GUSD has been embroiled in a dispute over its Gemini Earn product. Despite any concerns, Llama Risk recently took a very in-depth dive into the stablecoin and gave it an encouraging writeup:

Asset Risk Assessment: Gemini Dollar (GUSD)

The secret to surviving as a centralized stablecoin? It appears to be domiciling yourself far from the United States.

Of the stablecoins flashing green candles over the past month, big winners include $FDUSD (+45.7%), which is based in the relatively saner regulatory environment of Hong Kong. The token has been gaining heavy adoption around the Binance ecosystem.

Tether ($USDT) has also emerged from the bear market in its strongest ever position. For most of the previous cycle it was battling neck-and-neck with $USDC for market share. Yet while $USDC has been bleeding out for the past year, Tether has continued growing.

$USDT’s growth extends to pretty much everywhere it has a massive footprint, not just within the Tron ecosystem where its found a home.

Rational observers would likely read the above and conclude the evidence clearly indicates that the United States approach to cryptocurrency regulation has been an unmitigated disaster. The question now is whether or not we will be wise enough to admit our error and correct course.

The proliferation of stablecoins meant America was on track toward undeserved dominance over DeFi. We surrendered this power through our myopic approach of driving stablecoin issuers outside our boundaries. Slaughtering this golden goose was a cataclysmic unforced error, and we hope that judgemental future historians get plenty of mileage out of mercilessly mocking our comical turn of events, much as they have with Japan’s pre-Meiji Bakumatsu period.

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While the highest stakes stablecoin battles are mostly fought offchain, this tier is also peppered with decentralized stablecoins. We already noted that $crvUSD growth has been a swift and steady success.

Yet even $crvUSD pales in comparison with the rapid ascent of Prisma’s $mkUSD. We’re naturally excited about Prisma’s launch (we count ourselves among the roster of its early smol investors), though we acknowledge that much of this early growth is a bit of a mirage. Prisma’s introductory rates (which certainly had to be a loss leader) were never destined to last, so much of this early growth came in the form of parasitic mercenary capital.

We are closely watching how Prisma manages its next phase of growth, particularly as its progenitor Liquity continues to suffer erosion (-10.65% over the past month). From what we’ve seen, we have confidence that both protocols will be positioned to thrive in the coming bull market.

The final stablecoin story we’re watching is the growth of RWAs. DefiLlama breaks these out on a separate page. Presuming you count T-Bill infused tokens as stablecoins, then the tiers we discussed above could admit a few additional members.

All of these RWA tokens have a notable presence around Curve, including the fastest growing RWA in the form of MatrixDock.

Worth keeping an eye on this space as always. Just because a stablecoin is meant to hold its value doesn’t mean it can’t be interesting…

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Disclaimers!