Stablecoin Transaction Volumes Significantly Inflated, Majority Not From Real Users: Analysis

According to a recent analysis by Visa and Allium Labs, only a small fraction of stablecoin transaction volumes originate from genuine users. Out of approximately $2.2 trillion in total transactions in April, only $149 billion stemmed from "organic payments activity," indicating that over 90% of stablecoin transactions are driven by bots or large-scale traders.

Analysis Reveals Discrepancy in Stablecoin Transaction Volumes

A comprehensive analysis conducted in collaboration with Visa has uncovered that a vast majority of stablecoin transaction volumes do not originate from genuine users. The study, which was reported by Bloomberg, sheds light on the significant gap between the total transaction volume and the organic payments activity.

According to the findings, only a fraction of the $2.2 trillion in total transactions recorded in April – approximately $149 billion – can be attributed to genuine payments made by real individuals. This suggests that less than 10% of stablecoin transaction volumes represent actual usage by legitimate users.

The analysis employed sophisticated techniques to isolate transactions made by real people by excluding those conducted by bots and large-scale traders. This approach provided a clearer picture of the organic payments activity within the stablecoin market.

The current supply of stablecoins stands at roughly $150 billion, with tether (USDT) and USD Coin (USDC) holding dominant market shares of 75% and 22%, respectively. Stablecoins, which are cryptocurrencies pegged to another asset (typically the U.S. dollar), are designed to maintain a stable value, reducing volatility.

The heightened attention on stablecoins has been prompted by announcements from companies like PayPal regarding the issuance of their own stablecoins. Furthermore, legislation to regulate stablecoins is considered to have a strong likelihood of passage through the U.S. Congress.

Commentating on the findings, Cuy Sheffield, Visa's Head of Crypto, acknowledged the inherent complexity of stablecoin data due to the multifaceted use cases they facilitate on general-purpose blockchains. Transactions can be initiated manually by end users or programmatically through bots, contributing to the noise in the data.

Despite the discrepancy between total transaction volume and bot-adjusted transfer volume, the analysis revealed a steady increase in the number of monthly active stablecoin users, reaching 27.5 million across various chains.

This research underscores the urgent need for clarity and regulation in the stablecoin market to ensure the integrity and transparency of transactions. As stablecoins continue to gain traction, policymakers and regulators must prioritize the development of appropriate frameworks to protect consumers and foster responsible innovation within the cryptocurrency ecosystem.