New Landscape of the Stablecoin Market: Technological Innovation and Ecological Evolution

Introduction

Stablecoins, as a core component connecting traditional finance and the cryptocurrency ecosystem, are continuously rising in strategic importance. From the early centralized custody model to the current stablecoins issued by protocols themselves, driven by on-chain synthesis and algorithmic mechanisms, the market structure has fundamentally changed.

At the same time, the demand for stablecoins from DeFi, RWA, LSD, and even L2 networks is rapidly expanding, further promoting the formation of a new pattern of coexistence, competition, and collaboration among various models.

This is no longer a simple market segmentation issue, but a deep competition regarding the "future form of digital currency" and the "on-chain settlement standards." This article focuses on the main trends and structural characteristics of the current stablecoin market, systematically sorting out the operating mechanisms, market performance, on-chain activity, and policy environment of mainstream projects, to aid in understanding the evolution trends of stablecoins and the future competitive landscape.

Stablecoin Market Trends

Global stablecoin total market value and growth trend

As of May 26, 2025, the total market value of global stablecoins has surged to approximately $246.38 billion, an increase of about 4927.64% compared to around $5 billion in 2019, showcasing explosive growth. This trend not only highlights the rapid expansion of stablecoins within the cryptocurrency ecosystem but also underscores their increasingly irreplaceable position in payments, transactions, and decentralized finance (DeFi).

In 2025, the stablecoin market continues to grow rapidly, with a 78.02% increase compared to the market value of $138.4 billion in 2023, currently accounting for 7.04% of the total cryptocurrency market value, further consolidating its core market position.

Trend Insights:

2019-2022: The market value of stablecoins surged from $5 billion to $167.9 billion, a 32-fold increase, mainly driven by the explosion of the DeFi ecosystem, increased demand for cross-border payments, and market risk aversion.

2023: Market capitalization fell by 17.57%, mainly due to the collapse of TerraUSD(UST) and the tightening of global cryptocurrency regulations.

2024-2025: Strong rebound in market capitalization, growing by 78.02%, reflecting increased institutional participation and the ongoing expansion of DeFi applications.

recent growth drivers

Macroeconomic Financial Environment:

Against the backdrop of increasing global inflationary pressures and financial market turbulence, the demand for "on-chain cash" has significantly risen among investors. The U.S. Treasury has defined stablecoins as "on-chain cash," providing a policy rationale for attracting traditional capital. At the same time, during periods of severe volatility in crypto assets, stablecoins are also seen as a safe haven.

Technological advancements and cost advantages:

Some efficient public chains represented by Tron significantly reduce transaction costs. Transfers of USDT on the Tron chain have almost zero fees, attracting a large number of trading users. High-throughput blockchains like Solana also promote the expansion of stablecoin use cases due to their high speed and low fee characteristics.

Organizations adopt enhancements:

In 2024, BlackRock will issue a tokenized fund settled in USDC, aimed at on-chain exploration of assets such as bonds and real estate, highlighting the importance of stablecoins in institutional-level settlement. According to estimates: in an optimistic scenario where a global compliance framework is gradually established and both institutions and individuals widely adopt it, the global stablecoin market supply is expected to reach $3 trillion by 2030, with monthly on-chain transaction volume hitting $9 trillion, and annual transaction total possibly exceeding $100 trillion. This means that stablecoins will not only stand alongside traditional electronic payment systems but will also occupy a structurally foundational position in the global clearing network. In terms of market capitalization, stablecoins will become the "fourth type of base currency asset" after government bonds, cash, and bank deposits, serving as an important medium for digital payments and asset circulation.

DeFi demand pull:

A certain bank pointed out that stablecoins are the "main entry point" for DeFi, and their low volatility characteristics make them the preferred choice for value storage and trading. The report shows that stablecoins account for more than two-thirds of on-chain trading volume, widely used in scenarios such as lending, DEX liquidity provision, and mining. In 2024, the TVL of leading DeFi protocols is expected to grow by about 30%, with USDC and DAI being the main trading pairs. After the 2024 U.S. elections, the market value of stablecoins increased by 25 billion USD, further validating their core role in DeFi scenarios.

Stablecoin Market Structure and Competitive Landscape

Market Concentration and Overall Pattern

Currently, the stablecoin market is highly concentrated, with Tether's market capitalization reaching $150.335 billion, accounting for 61.27%; USD Coin's market capitalization is $60.822 billion, accounting for 24.79%. Together, they account for a staggering 86.06% market share, forming a duopoly.

Nevertheless, emerging stablecoins are gradually rising to challenge the dominant position. For example, USDE launched by Ethena Labs has grown from $146 million at the beginning of 2024 to $4.889 billion, an increase of more than 334 times, making it the fastest-growing stablecoin. Additionally, USD1 and USD0 have also shown good market expansion trends, but in the short term, they are still insufficient to shake the dominance of USDT and USDC.

Competitive Landscape Analysis

Market competition mainly unfolds among three types of stablecoins:

Fiat-collateralized stablecoins: USDT and USDC are backed by US dollar reserves, leveraging transparency and compliance to gain an edge in centralized exchanges and traditional finance. For example, USDT added a market cap of $30 billion in 2024, demonstrating its market trust.

Decentralized stablecoin: USDE, through the synthetic dollar mechanism and native yield model, is expected to become a popular trading pair on a certain DEX in 2024, with its locked value growing by 50%, rapidly rising in the DeFi ecosystem; meanwhile, DAI, relying on its decentralized governance, attracts DeFi users but has a smaller scale, only 3.631 billion.

Emerging stablecoins: USD1 rapidly expanded to $2.133 billion through institutional endorsement; USD0 attracts users with DeFi incentive mechanisms, reaching a market cap of $641 million.

Others: The collapse of TerraUSD in 2022 led to a trust crisis in algorithmic stablecoins, prompting the market to shift towards more transparent fiat-collateralized stablecoins, resulting in USDC's market share growing by about 10% between 2023 and 2024.

The rise logic of USDE

USDE is a synthetic dollar stablecoin based on Ethereum, collateralized by stETH, and employs a delta-neutral hedging strategy to maintain its peg to the dollar. Its rapid growth can be attributed to the following factors:

Innovative revenue mechanism: USDE provides high returns to holders through the "Internet Bond" feature, which comes from staking rewards of stETH and the funding rate spread in the perpetual contract market. This high-yield model has attracted a large number of DeFi users and institutional investors, especially in a low-interest-rate environment where traditional financial products struggle to offer similar returns.

Deep integration of the DeFi ecosystem: The widespread support of USDE on DeFi platforms makes it one of the preferred stablecoins for DeFi users. Users can easily trade, provide liquidity, or participate in lending without worrying about price fluctuations. Data shows that the locked amount of USDE on a certain DEX has increased by 50%, reflecting its important position in the DeFi ecosystem.

Decentralization and anti-censorship features: As a stablecoin fully based on crypto assets, USDE does not rely on traditional financial systems, which is significantly appealing to users pursuing decentralization, especially in regions where traditional financial services are limited or restricted.

Growth of market demand: With the expansion of the DeFi and cryptocurrency ecosystem, the demand for stablecoins continues to increase. USDE, as an innovative and fully decentralized stablecoin, meets the market's demand for new stablecoin solutions.

Institutional Support and Collaboration: Ethena Labs' collaboration with well-known crypto investment institutions and exchanges has enhanced the market confidence and liquidity of USDE.

Marketing and Community Engagement: Ethena Labs quickly attracted the attention of users and developers through effective marketing strategies and community incentive programs, promoting the adoption of USDE.

The Challenges of Emerging Stablecoins

USD1: Issued by World Liberty Financial, with a market cap of 2.133 billion USD, ranking 7th, its market cap skyrocketed from 128 million USD to 2.133 billion USD in just one week, demonstrating rapid growth.

WLFI is associated with the Trump family and has secured a $200 million investment from a certain exchange and MGX, enhancing institutional endorsement. The report indicates that USD1 has been chosen as the settlement currency for significant transactions, such as the collaboration project with the Pakistani government, further increasing its market influence.

USD1 has rapidly expanded through exclusive agreements and institutional adoption, but its political background may pose regulatory risks.

USD0: Issued on the Usual platform, with a market cap of 641 million USD, ranking 12th. It attracts users through the USUAL token incentive mechanism, allowing holders to participate in governance and share platform profits.

USD0 combines the low volatility of stablecoins with the yield potential of DeFi, attracting users who focus on decentralized innovation.

The unique position of USD0 in the DeFi ecosystem brings growth potential, but it needs to enhance market awareness and liquidity.

Emerging stablecoins challenge the market through differentiated strategies, but it is difficult to shake the dominance of USDT and USDC in the short term.

Mainstream Stablecoin Analysis and Comparison

This section systematically analyzes and compares the top five mainstream stablecoins by market capitalization: (USDT, USDC, DAI, USDE, and USD1) from the dimensions of mechanism structure, asset support types, liquidity and application scenarios, and risk points.

liquidity and trading pair distribution

The liquidity of mainstream stablecoins such as USDT and USDC is extremely abundant, with deep trading pairs available on the vast majority of mainstream exchanges and decentralized trading platforms. They almost cover all major public chains: USDT/USDC can be traded on Ethereum, Tron, Solana, BSC, Polygon, and other chains; while emerging stablecoins ( like USD1 and FDUSD) are initially launched mainly on specific public chains ( such as Tron, Solana, and others ) as well as on some centralized exchanges. Recently, the Tron network introduced zero fees for USDT, further enhancing the trading volume and liquidity of USDT on that chain. Overall, USDT and USDC are the most globally liquid stablecoins, while the liquidity of other stablecoins is concentrated in specific ecosystems and exchanges.

Reserve Transparency

Reserve transparency is a key factor in assessing the credibility of stablecoins. Below is a detailed analysis of the reserve transparency of various stablecoins:

USDT: Reserve situation: Claimed to be backed by cash, bank deposits, short-term government bonds, and other assets. Transparency: Reserve reports are released quarterly, but have long been questioned, with some reports showing a complex reserve structure and certain assets being difficult to verify. For example, in 2023, it was pointed out that commercial paper was included in the reserves, raising market concerns. Risk: Historically, there have been multiple regulatory investigations due to issues with reserve transparency.

USDC: Reserves: Supported by cash and short-term U.S. Treasury bonds, reserve assets are held in regulated financial institutions. Transparency: Monthly audited reserve reports are published, providing high transparency and strong market trust. For example, the May 2025 report shows total reserves exceeding $60 billion, all in cash and government bonds. Risk: Dependent on the traditional financial system, affected by macroeconomic conditions and regulatory policies.

USDE: Reserve status: Synthetic US Dollar, backed by stETH as collateral, and maintaining value through delta-neutral hedging strategies via DeFi protocols. Transparency: Fully based on blockchain, reserves and mechanisms are transparent, and users can verify on the DeFi platform. For example, in May 2025, the collateral assets of USDE were publicly available on-chain, showing that the stETH collateral rate exceeded 150%. Risk: Dependence on the stability of the DeFi ecosystem, market volatility may affect its value.

DAI: Reserve situation: composed of multiple cryptocurrencies