Stablecoin Special Report (Part 1): Mechanisms and Historical Evolution

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Introduction to Stablecoins

Stablecoins are cryptocurrencies designed to maintain a stable value by pegging to fiat currencies (e.g., USD, EUR) or stable assets (e.g., gold, commodities). As of June 2025 (CoinGecko data), the global stablecoin market capitalization exceeds $260 billion, accounting for 8% of the total crypto market, serving as a bridge between traditional finance and the crypto ecosystem.

Types of Stablecoins

Based on stabilization mechanisms and collateral backing, stablecoins fall into three categories:

  1. Fiat-Collateralized Stablecoins: Backed 1:1 by fiat reserves (e.g., USDT, USDC). Dominates 90%+ of the market.
  2. Crypto-Collateralized Stablecoins: Overcollateralized with other cryptocurrencies (3–5% market share).
  3. Algorithmic Stablecoins: Use smart contracts to adjust supply dynamically (<1% market share).

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Historical Development of Stablecoins

Key Phases:

  1. Foundational Phase (2014–2016)

    • 2014: Tether (USDT) launched as the first USD-pegged stablecoin.
    • Slow adoption; market cap reached ~$1B by 2016.

  2. Adoption Phase (2017–2019)

    • China’s 2017 crypto禁令 shifted demand to offshore exchanges using stablecoins.
    • Market cap surged to $10B by end-2017.

  3. Explosive Growth (2020–2022)

    • Pandemic-era monetary policies fueled crypto adoption.
    • Market cap skyrocketed from $50B (2020) to $1.5T (2022).

  4. Stagnation (2022–2024)

    • Regulatory crackdowns (e.g., Tether’s reserve opacity) and the UST collapse eroded trust.
    • USDC gained traction as a "compliant" alternative until the 2023 SVB crisis triggered a temporary depeg.

  5. Resurgence (2024–Present)

    • Pro-crypto U.S. policies and global regulatory frameworks (MiCA, U.S./HK laws) reignited growth.
    • Market cap surpassed $200B by 2024.

FAQ Section

Q1: What makes fiat-collateralized stablecoins dominant?

A: Their 1:1 redeemability and regulatory compliance instill higher trust compared to algorithmic or crypto-backed variants.

Q2: How did the SVB crisis impact USDC?

A: A bank run froze $3.3B of USDC’s reserves, causing a 20% depeg. Though resolved in 48 hours, it reversed USDC’s growth momentum.

Q3: Why is 2024 a turning point for stablecoins?

A: Clearer regulations (e.g., MiCA) and political support reduced systemic risks, attracting institutional capital.

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