Stablecoin supply reaches $162 billion amid rising institutional demand and liquidity hunt

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The stablecoin supply is at $162.1 billion following a $4.7 billion rise in August, which represents a 3% monthly growth, Artemis’ data reveals. This movement represents different trends in the market, such as institutional adoption, the search for stability and liquidity, and growth in confidence.

Notably, the growth in stablecoin supply came in the same month when Bitcoin (BTC) retraced nearly 9%, followed by the broad crypto market. 

Tether USD (USDT) dominates the market, showing a $119 billion market cap. This is a major lead against USD Coin’s (USDC) $33.5 billion supply, which is the second-largest stablecoin issuer.

Sky’s stablecoin DAI comes in third, with market participation of $5.3 billion.

Chasing solid ground

Anastasija Plotnikova, CEO & co-founder of Fideum, told Crypto Briefing that this disparity reflects a shift in investor behavior, who are now swapping their holdings for a more stable and liquid alternative.

“While this trend can bolster the overall health of the crypto market by providing a safe haven for assets, it also raises critical questions about their long-term stability. The ongoing evolution of stablecoins will likely play a crucial role in shaping the future landscape of the cryptocurrency market,” she added.

Elaborating on the long-term stability, Plotnikova mentions the European Union (EU) regulatory framework Markets in Crypto-Assets Regulation (MiCA), which imposes new rules for stablecoins, adding layers of compliance and oversight. 

Although the results of these regulatory changes in the EU are yet to be seen, Fideum’s CEO believes that stablecoins will continue to be essential for facilitating international low-cost transactions, and driving demand and adoption in the crypto ecosystem.

Institutional adoption gauge

The rising supply of stablecoins amid crypto prices’ drawdown can be also seen as a gauge for institutional interest, according to Philipp Zentner, CEO of LI.FI. He explained usually onboard into crypto through stablecoins to avoid volatility risks.

This creates a flywheel where institutional adoption results in stablecoin supply growth, thus boosting confidence among other institutional players and signaling trust in the space.

“We can expect a significant wave of stablecoins to be released soon. Major players like JPMorgan, VanEck, and PayPal are already developing their own stablecoins to bring their clients into the crypto ecosystem,” Zentner highlighted.

Crypto’s killer app

James Davies, CPO of Crypto Valley Exchange CVEX.XYZ, considers stablecoins as the most successful use case in crypto so far, boosting the already existent e-money platforms with trustless transfers between entities.

However, he stated that the stablecoin supply is still in its “very early” stage of growth, considering the discussions around central bank digital currencies (CBDC) and the potential of digital assets for transfers. 

“In my view, stablecoins that effectively address capital allocation challenges will have an even greater impact in this space. We anticipate this trend to continue, with their use serving as a catalyst for further on-chain app development,” Davies concluded.

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