Footprint Analytics: Rapid Expansion of the Stablecoin Market | Annual Report 2021

The second thing most people do after entering the world of blockchain, after buying BTC or ETH, is to get some Tether or USDC. As a bridge between the real world and Web 3.0, stablecoins play an incredibly important role in the functioning of the blockchain.

According to Footprint Analytics, issuance of USDC, a US dollar stablecoin, surpassed $42 billion from issuance in December, ranking second in terms of the market map after USDT (Tether) with a value of $78.4 billion. The decentralized stablecoin UST surpassed $10 billion in market capitalization in the same month.

Footprint Analytics – USDT, USDC and UST . Market Cap

Besides the massive expansion of the stablecoin market, many countries have noticed the risks and conducted studies on possible regulations. In this article, we will review what happened to stablecoins in 2021, focusing on the six most significant events.

1. Algorithmic stablecoins ESD and FRAX break into the top ten

Data from Footprint Analytics data shows that algorithmic stable ESD rose from $120 million to $440 million, or 266.7%, in January, while FRAX rose 351.6% to $140 million. They are now in the ninth and tenth positions among the largest stablecoins by market capitalization.

Footprint Analytics – Market Value of ESD and FRAX

Algorithmic ESD Stablecoin, otherwise known as Empty Set Dolla, is a synthetic asset released by Empty Set in 2020 and is a decentralized algorithmic stablecoin based on the US dollar. FRAX is a stablecoin protocol with hybrid algorithm, released by FRAX in 2020.

2. Fei Algorithm Stablecoin Announces Closure of Incineration Facility

In April, the price of ETH fell below $2000 at the same time that the FEI algorithmic stablecoin price fell below $0.9. The Fei protocol should automatically activate its burning facility to destroy Fei, which will wipe out all users’ money. In order to protect the coin from decoupling, the project override the protocol settings and malfunctioned the burning facility.

While such a measure also protects users’ assets, FEI’s disobedience to the original rules degrades its reputation, even with the financial backing of well-known institutions like Coinbase. Based on Footprint Analytics data, we can see hundreds of millions of dollars flowing out and FEI’s market value regressing off a cliff.

Footprint Analytics – FEI’s Market Cap

3. Get cryptocurrency in Euro and other cryptocurrencies

In 2021, the number of stablecoins that underpin fiat currencies other than the US dollar, such as the euro, the South Korean won and the Japanese yen, gradually increased.

Among the many non-dollar stablecoins, EURS and SEUR, which are pegged to the euro, have the same rate, followed by KRT which is the Korean won stablecoin. The Japanese yen’s stablecoin, JYPC, is a relatively mediocre performer.

Footprint Analytics – Non-pegged US stablecoin market capitalization

El Salvador has also planned to launch a local government-issued stablecoin by the end of 2021 but has not released any further news. Instead, it adopted Bitcoin as legal tender in September.

4. Stablecoin projects suffer from lightning loan attacks

With the expansion of the stablecoin market, the number of attacks it encountered increased, mainly from flash loan attacks.

  • In June, SafeDollar, a stablecoin project deployed on Polygon, was attacked and the value of the issued stablecoin, SDO, briefly went to zero. It has since recovered, but has not returned to its base value of $1.
  • In August, WUSD, the stablecoin of Wault Finance, a DeFi platform deployed on BSC, was hit by a quick loan attack and lost $800,000. The price of WUSD has fallen below $1.
  • In November, OUSD, a stablecoin issued by Origin Protocol, suffered a quick loan attack, losing $2.25 million in DAI and $1 million in ETH.
Footprint Analytics – OUSD, WUSD and SDO Price

5. Countries launch regulatory efforts

In 2021, the total number of stable issuances issued on Ethereum exceeded 100 billion, which led to some countries looking at regulations.

United States of America

  • October: The US Securities and Exchange Commission gained an edge in the US agency’s debate on how to regulate stablecoins and the promising rights to regulate stablecoins.
  • November: The US Financial Stability Oversight Board released a report on stablecoins and urged Congress to pass legislation.
  • December: The US House of Representatives Financial Services Committee holds hearings on the regulation of stablecoins.

South Korea

    • November: Shinhan Bank says it is testing a stablecoin version of the Korean won based on the Hedera Hashgraph blockchain.
    • November: The Korea Financial Services Commission (KFSC) released a report on restrictions on the issuance of tokens.

Europe

  • November: The European Central Bank expanded the PISA framework to include digital currencies and stablecoins.
  • December: Japan’s Financial Services Agency says it will impose new restrictions on the issuance of stablecoins in 2022.

6. Best Managed Stablecoin Project of 2021: Terra

While the stablecoin market expanded rapidly in 2021, no project has stood out in the past year like Terra, which we covered in a previous article.

Terra’s TVL price peaked in 2021 at $21.09 billion on December 27, up 62.9 times from $330 million on January 1. The price of its native token, LUNA, also rose 306.3 times to an annual high of $199.78.

Footprint Analytics – TVL of Terra

Terra also launched UST, a US dollar stablecoin with a market cap of over $10 billion, and KRT, a Korean won stablecoin.

conclusion

In 2021, more than 20 new stablecoins were launched, the highest number ever. In addition, given the continued growth of stablecoin transactions in 2021, the increasing demand for cross-border payments and the value-preserving function of stablecoins, Footprint believes that stablecoins will continue to expand their role as a bridge for cryptocurrency in 2022.

Moreover, investors and crypto enthusiasts will have more options outside of pegging their cryptocurrency to the US dollar, while some stablecoins, such as Tether, are likely to feel the heat of regulators.

Benefits of CryptoSlate Readers

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Date and author: January 12, 2022, available at: [email protected]

Data source: Stablecoins Dashboard

This article is part of our “Year in Review” series.

What are fingerprint analytics?

Footprint Analytics is an all-in-one analytics platform for blockchain data visualization and insights discovery. It cleans and combines on-chain data so users of any experience level can quickly begin searching for codes, projects, and protocols. With over a thousand dashboard templates as well as a drag-and-drop interface, anyone can create their own custom layouts in minutes. Discover blockchain data and invest smartly with Footprint.

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