Stablecoins

What Are Stablecoins?

• Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions.
• Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference.
• Stablecoins are more useful than more-volatile cryptocurrencies as a medium of exchange.
• Stablecoins may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold.
• Stablecoins pursue price stability by maintaining reserve assets as collateral or through algorithmic formulas that are supposed to control supply.

What Is the Purpose of Stablecoin?

• Stablecoins aim to provide an alternative to the high volatility of popular cryptocurrencies, including Bitcoin (BTC), which can make cryptocurrency less suitable for common transactions.

How Does Stablecoin Work?

• Stablecoins attempt to peg their market value to some external reference, usually a fiat currency.
• They are more useful than more-volatile cryptocurrencies as a medium of exchange. Stablecoins may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold or use an algorithm to control supply.
• They also maintain reserve assets as collateral or through algorithmic formulas that are supposed to control supply.

Which Is the Best Stablecoin?

• The right answer is it varies.
• One of the most popular and largest stablecoin by market capitalization is Tether (USDT). It is pegged to the U.S. dollar at a 1:1 ratio and backed by gold reserves.
• Another one is USDC with similar backing by the US Dollar. [1]

Methodology

• We define the transaction volume as the swap volume where these stable coins are swapped from into other assets.

• Find all the swaps from for the various Stablecoins on Osmosis

• We look at the swap volume as well as the number of users swapping to define the popularity.

• We Compare the transaction volume for various stable coins on Osmosis.

• For the Swap fees we join the swaps table with transactions table to get the fee for each swap.

• Join Swaps table with Labels to get currency labels.

Overview

• Stablecoins have been the central pillar of crypto and everyone has been trying to take the market share of being the stablecoin of choice.
• USDT and USDC have been the centralized coins of choice, however there was a time when UST or USTC now was the stablecoin of choice.
• This analysis is aimed at uncovering the stablecoin of choice in 2022 before and after the UST crash.
• We look at the following metrics:
  • Swapping other coins into Stablecoins
  • Swapping Stablecoins into other coins
  • Swap Fee accumulated while swapping Stablecoins into other coins
  • Swap Fee accumulated while swapping other coins into Stablecoins

Swapping other coins into Stablecoins

• This is pretty clear, UST was the stable coin of choice right up to the crash with such high swap frequency swapped into UST.
  • Right after the crash we see USDC just take over as the stablecoin of choice.
• Number of swappers show the same picture with UST dominating right before the crash and nothing afterwards.
• Even though Terra crashed on 09 May, barely 5 months into the year, yet it almost rivals and beats the second best USDC in almost all total numbers.

Swap Fee($OSMO) accumulated while swapping other coins into Stablecoins

• What is weird is that UST was the stable coin of choice right up to the crash and was generating the highest fees.
  • Right after the crash we see USDC just take over with such high swap fees.
• Average swap fee shows the same picture with UST dominating with the lowest average swap fee, however right after the crash a myriad of coins take over.

Swap Fee($OSMO) accumulated while swapping Stablecoins into other coins

• What is weird is that UST was the stable coin of choice right up to the crash and was generating the highest fees.
  • Right after the crash we see USDC just take over with such high swap fees.
• Average swap fee shows the same picture with UST dominating with the lowest average swap fee, however right after the crash a myriad of coins take over.

Swapping Stablecoins into other coins

• This is pretty clear, UST was the stable coin of choice right up to the crash with such high swap frequency swapped into UST.
  • Right after the crash we see USDC just take over as the stablecoin of choice.
• Number of swappers show the same picture with UST dominating right before the crash and nothing afterwards, but with quite a lot of reduces numbers.
• Even though Terra crashed on 09 May, barely 5 months into the year, yet it almost rivals and beats the second best USDC in almost all total numbers.
• 09 May has an epic spike where a lot of wallets swapped UST into other coins as Terra crashed.

Conclusion

• UST(Terra USD Classic) was the stablecoin of choice until the crash in May 2022.
• It was completely dominant and no other stablecoin was even near.
• However after the crash USDC has taken over and is now the stablecoin of choice, beating USDC, DAI, BUSD, etc and other stablecoins.