GM! Welcome to Milk Road PRO – your weekly crypto dose that’s more stable than your morning coffee. 

Today, we are going to talk about the biggest crypto use case: Stablecoins. 

They are digital representations of fiat currencies (like the USD) on the blockchain. And people love them.

In fact, stablecoins are responsible for most of the blockchain activity measured in USD, as we can see below.

Today, they represent 55% of all blockchain activity and handle more than $3 trillion in monthly volume. In comparison, Visa handles about $1.2 trillion monthly.

Moreover, stablecoins are immune to bear markets (2022 & 2023). 

Looking at the charts below, you realize there was no bear market for stablecoins – unique active addresses and transactions are up considerably since 2020. 

This looks rather positive as the trend is continually growing. Even through the bear market, there were about 6 million active addresses sending about 10 million stablecoin transactions daily. 

Outside of speculation, there is no other use case onchain more established than stablecoins. We believe that stablecoins will onboard more people onchain in the next 5-10 years than any other use case.

But as an investor, you might be wondering: “stablecoins are great and all, but how can I capitalize on this trend? Stablecoins are meant to be just that… stable at $1!” 🤔

Well, in today’s report, we’re going to help you understand the magnitude of this opportunity and how you can capitalize on it.

Hint: There are plenty of investments that allow you to capture the upside of stablecoins.

So in this report, we will cover the following key sections:

1. Stablecoins vs fiat: why are stablecoins the future of money.

2. The current landscape of the stablecoin market.

3. The massive market opportunity for stablecoins.

4. Why the stablecoin market is set for explosive growth.

5. 4 ways to capitalize on the booming stablecoin market.

With these sections, we aim to provide a comprehensive overview of the stablecoin landscape and their future prospects.

But let's start with a quick introduction.

WHAT ARE STABLECOINS? 🤷

As we mentioned earlier, stablecoins are digital representations of FIAT currencies. Think of them as dollars that are not sitting in your bank account but instead on the blockchain. 

There are about 160 billion stablecoins today, which is 0.8% of all USD in circulation.

Stablecoins can actually be denominated in any currency—USD, EUR, JPY, CNY, and more. However, 98% of all stablecoins are denominated in US dollars today.

This is likely because the US dollar is still the most used currency in the world and is considered the world's reserve currency.

Now, let's take a closer look at the stablecoin market and quickly explain the different types of stablecoins that exist today.

1. Fiat-backed: This type of stablecoin means that each dollar on the blockchain is backed by one dollar in the bank. The two biggest stablecoins, USDT by Tether and USDC by Circle, are both fiat-backed and have about 90% market share.

2. Crypto-backed: Each dollar on the blockchain is backed by the value of one dollar of any accepted collateral, such as $BTC or $ETH. The biggest representatives of this category are DAI by Maker and USDe by Ethena.

3. Algorithmic: These stablecoins use algorithms and smart contracts to maintain their value at one dollar. They are the least preferred option among investors due to multiple hacks and exploits of algorithmic stablecoins in the past (i.e. Terra Luna 😣).

The majority of the stablecoin market consists of two types of stablecoins: fiat-backed and crypto-backed. 

Therefore, when we talk about stablecoins and their future potential, we are primarily referring to these types.

Now that we‘ve covered the basics of stablecoins, let’s talk about why people actually care to use a dollar onchain rather than in a bank.

WHY STABLECOINS > DOLLARS?? ⚖️

There are three main demand drivers for stablecoins:

1/ An easy access alternative

Many people around the world do not have access to US dollars or other major currencies. The reason this is a problem is that for hundreds of millions of people around the world their local currency is inflating at 10%+/year, and in some cases, 100%+! This is eating away at their savings.

Instead, stablecoins give anyone in the world with an internet connection access to US dollars.

2/ Faster, cheaper, and more secure solutions.

Sending traditional fiat currency is often slow and expensive. Here are a few examples to illustrate this:

1. Slow Transfers: Wiring fiat currencies from one country to another can take several days to weeks.

2. High Remittance Fees: Companies like Western Union charge up to 30% of the transferred amount for sending money internationally. That’s an outright scam! 

3. Internet Purchase Fees: Almost every online purchase incurs a fee of over 3% due to payment processors like Stripe, PayPal, and others.

The current digital fiat system has many flaws. As Jeff Bezos says, "Their margin is my opportunity." 

Stablecoins offer a solution by making transactions instant and almost free, anywhere in the world

3/ Yield opportunities. 

People are always looking for the best yield opportunities, and blockchain offers higher yields than traditional finance, which might attract more users.

We are reaching an inflection point where stablecoins are starting to really take off and become a part of our daily lives.

But before we talk about its potential growth, let's examine some historical data first. 

WHERE IS STABLECOIN ADOPTION AT CURRENTLY?

This chart shows the total amount of stablecoins in circulation, currently sitting at $160 billion.

Obviously, the Terra Luna collapse in 2022 caused some supply reduction, but now we are back on a growth trajectory. 

Next, let's look at the weekly volumes of 4 selected stablecoins. This helps us see how much value is being processed using stablecoins on a weekly basis.

Since the beginning of 2024, the weekly volume has been on a strong uptrend. We can see weeks with $600 billion to $800 billion in weekly volumes. 

For context, Visa processes about $300 billion in weekly volume. 

The trend is further confirmed by the increased number of stablecoin transactions.

Again, we see that since October 2023, the number of transactions has doubled to around 350 million transactions per month. 

Great, let's now look at the users. 

There are about 28 million users (addresses) interacting with stablecoins on the blockchain monthly. In comparison, Visa has about 1.095 billion accounts. 

Using Visa as the benchmark, there are about 40 times more users who could potentially start using stablecoins.

This brings us to our next section.

HOW BIG CAN STABLECOINS GET?

Pretty big. 😅