Stablecoins: Dominated by Crypto Exchanges and Bots, Minimal Real-World Use

Recent research by Bloomberg and Visa found that less than 10% of stablecoin transactions are linked to real-world use. The study revealed that most transactions involve operations on crypto exchanges and are partly conducted by bots. Despite this, stablecoin active users have steadily grown to 27.5 million monthly users.

Stablecoins: Unveiling the Dominance of Crypto Exchanges and Bots

Bloomberg Study Reveals Minimal Use for Real-World Transactions

A recent Bloomberg study has shed light on the usage patterns of stablecoins, digital assets pegged to fiat currencies like the US dollar. The findings indicate that less than 10% of all recent transactions in prominent stablecoins, such as Tether (USDT) and USD Coin (USDC), are directly linked to real-world applications.

Limited Adoption for Payments and Everyday Use

The research, conducted in collaboration with Visa and Allium Labs, suggests that stablecoins are primarily employed in cryptocurrency trading rather than for everyday purchases or payments. The vast majority of transactions involve operations on crypto exchanges, executed by a combination of human traders and automated bots.

Exclusive Focus on On-Chain Transactions

The study's analysis focused solely on on-chain transactions, which are publicly verifiable and accessible on blockchain networks. Internal exchanges within centralized crypto exchanges were excluded from the examination.

Organic Payment Activities Constitute a Mere Fraction

During the month of April, the study analyzed transactions totaling approximately 2.2 trillion dollars. Of this vast volume, only 149 billion dollars were attributed to "organic payment activities." This indicates that the overwhelming majority of stablecoin transactions are not driven by actual purchases or payments.

Predominance of Crypto Market-Related Transactions

Conversely, the remaining transactions were predominantly related to crypto markets, including cryptocurrency trading and other financial asset exchanges. A significant proportion of these transactions were carried out by automated bots, which have become ubiquitous in both traditional and crypto markets.

Growth in Monthly Active Users

Despite the limited use of stablecoins for real-world purposes, the study highlights a steady increase in their monthly active user base. As of the present, there are an estimated 27.5 million monthly active users across all blockchain networks.

USDT and USDC Dominate Stablecoin Market

USDT and USDC currently control the vast majority of the stablecoin market, with total supply exceeding 150 billion dollars. USDT commands a market share of 75%, while USDC holds a 22% share. All other stablecoins collectively account for less than 3% of the market.

Enhanced Utility in Crypto Markets

Despite their theoretical equivalence to fiat currencies, stablecoins are widely used in crypto markets due to their superior ease of transfer and transaction speed. They can be moved seamlessly across decentralized blockchains like Ethereum without facing the limitations or obstacles associated with fiat currencies.

Fiat Currency Barriers and Resistance

In contrast to stablecoins, fiat currencies encounter several obstacles in crypto markets. Bank transfers may delay transactions or encounter resistance from financial intermediaries. Furthermore, the use of fiat currencies is restricted on decentralized exchanges, necessitating the use of stablecoins for seamless trading operations.

Essential Role of Bots in Market Dynamics

Bots play a critical role in both traditional and crypto financial markets due to their ability to execute lightning-fast transactions in massive quantities. They are particularly prevalent in arbitrage trading, where they exploit price differences between various crypto exchanges to generate profits.

Arbitrage and Large-Scale Trading

The proliferation of bots in crypto markets has been driven by the need to maintain arbitrage opportunities and facilitate large-scale trading. Given the vast majority of cryptocurrency transactions occur within closed exchange ecosystems, bots are essential for preventing significant price disparities across platforms.

Limited Real-World Adoption

In light of the dominance of crypto exchange-related transactions and the limited use of stablecoins for real-world payments, it is unsurprising that the vast majority of stablecoin transactions are not driven by tangible consumer spending or online purchases.

Conclusion

The Bloomberg study provides valuable insights into the current usage patterns of stablecoins. While they have seen increased mainstream adoption, their primary application remains within crypto markets and trading operations. The limited use for real-world transactions highlights the challenges stablecoins face in gaining widespread acceptance as a medium of exchange in everyday life.