The Truth About the Stablecoin Market: Transformation from Issuance to Distribution

Stablecoins are no longer a question of “whether” they can reshape the global financial landscape, but rather “how” they will reshape it. With the introduction of the U.S. Genius Act, the standardization of stablecoin issuance is on the horizon, and the market is shifting from the issuance phase to the distribution phase.

The era of high profits for issuers is coming to an end, and distributors are becoming aware of their value. It is increasingly important to understand which applications, protocols, and platforms achieve real growth, especially for mature on-chain stablecoin scenarios.

The Truth and Misconceptions of the Stablecoin Market

Although the market capitalization of stablecoins has reached $240 billion and the annual trading volume has soared to $3.1 trillion, there are many misunderstandings in the market. To expand market share, issuers pay huge fees to distributors - in 2023, Circle paid $900 million to distributors like Coinbase, accounting for more than half of its revenue.

The so-called annual trading volume of $3.1 trillion is misleading, with 31% coming from thousands of daily circular operations by MEV bots, while the actual trading volume from human participants is much lower than the surface data.

There is a serious concentration of wealth in the stablecoin sector. Currently, there are about 150 million stablecoin wallets, but 99% of the wallets have a balance of less than $10,000, while only 20,000 unlabelled wallets control $76 billion, accounting for 32% of the total supply.

The real explosive growth of stablecoins occurred in the past six months. Since the summer of 2023, DeFi stablecoin trading volume surged from $100 billion to $600 billion, while meme coin trading generated $500 billion in stablecoin flow, accounting for 12% of the annual trading volume.

However, the criteria we use to measure the success of stablecoins are inverted. The decrease in total locked value (TVL) may not be a signal of reduced usage, but rather a reflection of technological advancements and efficiency improvements; an increase in trading volume may merely indicate increased bot activity. While the market is still focused on the competition for market share between USDC and USDT, real change is quietly occurring at the distribution level.

! The “false boom” behind the $240 billion stablecoin: 31% of trading volume comes from bots, and 99% of wallets are less than $10,000

Transformation of the Stablecoin Industry

issuer’s historical value gradually gives way

In the early stablecoin era, value was mainly concentrated in the issuers. Maintaining a 1:1 peg and handling complex tasks such as large-scale issuance and redemption, managing reserves, and collaborating with banks allowed Tether and Circle to dominate the market. By monetizing reserve earnings, even ordinary interest rates could generate huge revenues.

Distributors Become Value Centers

Today, trusted custody, liquidity, and redemption are no longer differentiating factors, but rather basic requirements. As more issuers with similar capabilities enter the market, the focus of stablecoins shifts from issuers to distributors.

Distributors who control user relationships and experiences are leveraging their influence to gain value. Circle’s IPO filing shows that it paid nearly $900 million to partners like Coinbase for the integration and promotion of USDC, which is more than half of its total revenue in 2023.

Many distributors are upgrading their platform architecture: PayPal has launched PYUSD, Telegram is collaborating with Ethena, Meta is exploring stablecoin channels, and fintech platforms like Stripe, Robinhood, and Revolut are embedding stablecoins into payment, savings, and trading functionalities.

Issuers are also actively responding. Tether builds wallets and payment channels, while Circle achieves full-stack development through API, developer tools, and infrastructure acquisitions, and simultaneously launches the Circle Payment Network to establish network effects.

We are undergoing a structural transformation: stablecoins are no longer seen as “cryptocurrencies”, but as “global infrastructure”; financial institutions are reshaping products using these new channels; the competitive landscape is constantly changing.

programmability and precise value allocation

With the popularity of stablecoins, new infrastructure has emerged, aimed at achieving programmability, compliance, and value sharing. Simple issuance is no longer key; stablecoins must adapt to the platform demands that drive usage.

The next generation of stablecoins includes programmable features such as reconciliation capabilities, compliance rules, and conditional transfers, making them application-aware assets that can automatically route value without off-chain protocols. Each use case is unique, and the emerging infrastructure stack can meet these diverse needs to achieve more precise value acquisition.

On-chain stablecoin use case analysis

The use of stablecoins is mainly concentrated in three environments: centralized exchanges, DeFi protocols, and MEV. These three types of addresses account for 38% of the total supply of stablecoins and 63% of the trading volume.

centralized exchange ( CEX )

• Share of total stablecoin supply: 27%
• Percentage of total trading volume in the past 30 days: 11%
• Reserve Income: $3 billion

Since the low point in 2023, the supply of top CEXs has nearly doubled. The supply of Coinbase, Binance, and Bybit fluctuates with the market, while Kraken and OKX have shown more stable growth. Due to most activities occurring off-chain, the usage of stablecoins within CEXs is difficult to assess comprehensively.

Decentralized Finance ( DeFi )

• Proportion of stablecoin total supply: 11%
• Percentage of total trading volume in the last 30 days: 21%
• Reserve Income: $1.1 billion

The supply of DeFi stablecoins comes from collateral, LP assets, as well as lending markets, DEX, and derivatives protocols. Over the past six months, the supply of CDP, lending, perpetual contracts, and staking has nearly doubled, while the share of DEX supply has significantly decreased, reflecting an increase in capital efficiency rather than a decrease in utilization.

The monthly trading volume of DeFi stablecoins increased from $100 billion to over $600 billion, primarily driven by DEX. Recently, memecoin trading volume soared to over $500 billion, accounting for 12% of the total trading volume.

MEV miner/node verification

• Percentage of total stablecoin supply: <1%
• Percentage of total trading volume over the past 30 days: 31%
• Reserve Income: Not Applicable

MEV bots extract value by reordering transactions, and their high-frequency behavior leads to an excessively high proportion of on-chain transaction volume, often reusing the same capital. MEV transaction volume surges during trading peaks and fluctuates as blockchains and applications respond to MEV strategies.

unassigned wallet

• Percentage of total stablecoin supply: 54%
• Percentage of total trading volume in the past 30 days: 35%
• Reserve Income: $5.6 billion

The stablecoin activity in unlabelled wallets is harder to explain, yet it accounts for the vast majority of supply and trading volume. These wallets include retail users, unidentified institutions, startups, passive holders, and unclassified smart contracts.

Although the number of unvested wallets is huge ( more than 150 million ), wealth is extremely concentrated. More than 60% of wallets hold less than $1, while less than 20,000 wallets ( hold more than $1 million ) controlling $76 billion, or 32% of the total supply. Wallets with balances of less than $10,000 ( account for 99% ) total holdings are only $9 billion, less than 4% of the total supply.

Conclusion

The stablecoin ecosystem has entered a new phase, with value increasingly flowing to developers who build applications and infrastructure. This marks a key maturation of the market, shifting the focus from the currency itself to the programmable systems that enable the currency to function.

With the improvement of regulatory frameworks and the emergence of user-friendly applications, stablecoins will experience exponential growth. They combine the stability of fiat currencies with the programmability of blockchain, becoming the cornerstone of future global finance.

! The “false boom” behind the $240 billion stablecoin: 31% of trading volume comes from bots, 99% of wallets are less than $10,000

The future of stablecoins belongs to the builders who create applications, infrastructure, and experiences that unleash their full potential. As this transition accelerates, we can expect more innovations in the ways value is created, distributed, and acquired. The future financial world will be defined by the ecosystems formed around stablecoins.