It's been 535 days since the death of UST/LUNA and nature has healed the stablecoin market.

During this time we've endured a cascading set of frauds, blowups, and collapses that wiped out billions for investors. SBF, Celsius, BlockFi, Genesis, etc.. the list goes on and on. Paired with the fastest interest rate rise in a century, the stablecoin market cap has been absolutely decimated over the last 18 months.

But something has changed over the last month. The total stablecoin market cap has increased by .53% over the last 30 days, as Bitcoin's price appreciation based on ETF approval expectations have sent a jolt of revitalization back into the market.

USDT

Tether, the largest stablecoin by market cap, saw a 1.52% increase in supply over the last month.

Whales are holding ever more USDT, with the number of wallets holding more than $10m up 5% over the last month. While still off its yearly highs, it does show increased demand for on-chain Tether usage.

Majority of USDT growth has been on the Tron blockchain, which is a nexus for USDT payments and real world usage.

On the year USDT supply is up 22%, but this is at USDC's 42.75% supply decrease in the wake of the fall of Silicon Valley Bank.

USDC

Over the last month, USDC outflows have slowed to a crawl, with supply only decreasing by a negligible 0.24%. However, USDC is still strong and working with DAOs like Maker and Frax to enable access to treasuries.

DAI

DAI, the third largest stablecoin by market cap, also grew over the past month, increasing its supply by .00034%. In the past quarter, DAI supply increased by a billion dollars after it launched treasury backed sDAI.

The real story of DAI is that its velocity is at a multi year high of 0.86 as investors are flocking to get exposure to short term treasury yields with sDAI.

For stablecoins (and cryptocurrencies in general), velocity refers to the frequency and speed with which a specific token or coin is traded or used in a given period. It's a measure of how often a token is being transferred or spent. High velocity indicates that a token is being frequently transacted, while low velocity suggests it's being held or used less often.

sDAI's seen 39% growth over the last month attracted to their 5% rate offering, with TVL of $641m.

PYUSD

PayPal's PYUSD is the latest entrant into the stablecoin market, and it's seen a resounding growth of 88% in just the last month, increasing its supply to $114m.

Lybra eUSD

Demand for Lybra Finance's eUSD increased its supply by 30% over the past month, to $104m. It's the fastest growing decentralized stablecoin at the moment, but it's under pressure as high rates are incentivizing users to mint cheap eUSD and then convert it to sDAI.

Interesting market dynamics in DeFi since TradFi yield joined the party, led by @MakerDAO DSR increase to 5%.

TLDR:
1. DSR leading to LUSD sell pressure (peg <$1)
2. Increased LUSD redemptions in @LiquityProtocol
3. Troves getting redeemed at >180% ratio (despite 110% LR)

1/14 pic.twitter.com/oexxviqoYJ

— definikola (@definikola) October 19, 2023

Frax's Growth Story

sFRAX was released at the beginning of October and has attracted $42m of deposits in just under 3 weeks.

Frax's yield bearing deposit vault is providing 6.43% to its depositors.

One of the best signs of FRAX growth is the total amount borrowed through Fraxlend. Over the past month, this figure has risen 5% to 61m FRAX. This uptick in borrowing is most likely attributable to the introduction of sFRAX. Borrowers were previously able to access rates of 1% for sfrxETH before the new yield vault was introduced.

2024 Future Growth

If we're right and the stablecoin market has bottomed, then its a good lagging indicator that crypto markets are poised for growth again.

Investors use stablecoins for buying crypto assets, adding liquidity to DeFi platforms, and leveraging with looping to bet on price increases. If BTC/ETH prices are set to continue to rise into 2024, stablecoin demand should rise significantly.