According to JPMorgan, while stablecoins are experiencing growth, their proportion within the overall cryptocurrency market is not increasing.

The market capitalization of stablecoins has been on the rise this year, signaling positive trends for the broader cryptocurrency market. According to CryptoQuant, the market cap for stablecoins has increased by approximately $3 billion this month and has grown by $34 billion, or 26%, since the beginning of the year. Currently, the total market cap stands at around $163 billion, nearing the 2022 peak of $180 billion, which was reached before the TerraUSD stablecoin and its associated Luna token collapsed.

Stablecoins are digital currencies that maintain a fixed value by being tied to an underlying asset, typically the U.S. dollar. Investors in the crypto space monitor stablecoins closely as indicators of market demand, liquidity, and activity. These digital assets are utilized for trading on both centralized and decentralized exchanges, as collateral in decentralized finance (DeFi) applications, and for peer-to-peer transactions.

Despite the growth in their market cap, stablecoins have not significantly increased their share of the total cryptocurrency market cap, according to JPMorgan. Analyst Nikolaos Panigirtzoglou noted that while the stablecoin market is expanding in dollar terms and nearing its previous 2022 peak, this growth largely mirrors the overall increase in the crypto market cap, with stablecoins maintaining a relatively stable market share.

Several factors have contributed to this trend. New stablecoin issuers and products, such as Ethena’s USDe, which offers higher yields, have emerged this year. Ripple has also shifted its focus to its RLUSD stablecoin following regulatory challenges with the Securities and Exchange Commission. Tether’s USDT has been a major driver, accounting for 67% of the total market cap growth in 2024, followed by Circle’s USDC with a 26% share, and USDe, which has reached a $3 billion market cap this year.

The introduction of the MiCA regulation in Europe in July has also attracted more participants to the stablecoin market. Some companies that had previously halted operations due to regulatory uncertainty have resumed activities under the new guidelines. In the U.S., the approval of U.S. bitcoin ETFs in January and the subsequent price rally have boosted stablecoin activity.

Panigirtzoglou explained that the significant price increases in bitcoin and ether this year, along with the resulting expansion of the crypto market cap, have naturally led to the growth of the stablecoin market. Stablecoins are essential for facilitating various crypto transactions, including lending and borrowing, and have been crucial in providing on/off-ramp solutions for investors, especially with the increased interest following the launch of spot bitcoin ETFs.

—Reporting by Michael Bloom of CNBC contributed to this summary.