Alternative asset manager Brevan Howard Digital believes that stablecoins, such as USDT (USDT) and USD Coin (USDC), will grow to trillions of dollars in supply and hundreds of trillions of dollars in value of transactions in the coming years, as global audiences access U.S. dollars through these cryptocurrencies. Co-head of Venture Investments Peter Johnson and analyst Sai Nimmagadda wrote in a recent report.
They note that stablecoins increasingly provide financial services to the global unbanked and underbanked, provide an escape from high-inflation currencies, and ignite an explosion of innovation built upon these new global open-network money movement rails. Payments giant Paypal’s launch of USD (PYUSD) stablecoin (PYPL) highlights the opportunity in stablecoins, one that could “upend global financial services.” Stablecoins are a type of cryptocurrency that has their value pegged to an asset, usually the U.S. Dollar.
The report projects that in 2022, stablecoins will settle over $11 trillion on-chain, dwarfing the volumes processed by Paypal ($1.4 trillion), almost surpassing the payment volume of Visa ($11.6 trillion), and reaching 14% of the volume settled by ACH, and over 1% of the volume settled by Fedwire. ACH payments are a type of electronic bank-to-bank transfer that is used in the United States, while Fedwire is the U.S. Central Bank’s settlement system for central bank money.
The investment manager is impressed by the growth of stablecoins, noting that more than 25 million addresses on the blockchain hold more than $1 in stablecoins. By comparison, a U.S.-based bank with 25 million accounts would rank fifth by number of accounts. The large number of stablecoins in small dollar denominations is also a sign that there are many who are holders, indicating the “potential for stablecoins to provide global financial services to customers underserved by traditional financial institutions.”
The report adds that stablecoin usage has shown a low correlation with crypto exchange volumes, with the large stablecoin transaction volumes likely used for non-speculative uses. The crypto markets have also demonstrated resilience, with the total market capital only falling about 24% since its peak, as opposed to a 57% drop for the total crypto-market cap.
