Crypto Analyzer

The Rise of Stablecoins: Tether Dominates the Ethereum Network

In recent years, there has been a significant shift in the dynamics of the Ethereum network. The volume of stablecoins on the Ethereum blockchain has surpassed the volume of the network’s native cryptocurrency, ETH. This trend has been highlighted by Messari’s research, which indicates a widening gap between ether volume and stablecoin volume since Tether (USDT) started migrating to the Ethereum blockchain in Q2 2019.

The Dominance of Stablecoins on Ethereum

Despite being the second-largest cryptocurrency by market capitalization, Ethereum is slowly being overshadowed on its own network by stablecoins. According to Ryan Watkins, an analyst at Messari, the transfer value of stablecoins on Ethereum has been steadily increasing, leading to a considerable gap between stablecoin and ETH volumes.

Messari’s data reveals a significant decline in the 12-month ETH transfer volume, dropping from $430 billion to just over $150 billion in the past year. In contrast, the value of stablecoins has witnessed a notable surge during the same period, further solidifying their dominance on the network.

Factors Driving the Dominance of Stablecoins

The rise of ERC20 stablecoins, particularly Tether (USDT), has contributed to the growing popularity of stablecoins on Ethereum. Tether’s migration to the Ethereum blockchain was a pivotal moment as its high daily trading volume and market capitalization have made it a preferred choice for institutional investors seeking stability in the volatile crypto market.

Another significant factor fueling the dominance of stablecoins on the Ethereum network is the emergence of decentralized finance (DeFi) applications. Ethereum’s popularity as a platform for building decentralized applications, especially in the financial sector, has led to an influx of DeFi protocols that predominantly utilize stablecoins. Data from DeFi Pulse illustrates the substantial increase in the total value locked in DeFi applications, with platforms like MakerDAO and its stablecoin Dai playing a significant role.

Overall, the data from Messari provides valuable insights into the current state of the Ethereum network, highlighting the growing influence of stablecoins and their pivotal role in reshaping the ecosystem.

As Tether continues to dominate the Ethereum network, it underscores the evolving landscape of digital assets and the increasing significance of stablecoins in the broader cryptocurrency market.