The stablecoins USDT and USDC are rarely used for payment transactions

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Yesterday, Bloomberg unveiled the results of a study that found that less than 10% of all recent transactions in stablecoins, such as USDT and USDC, are linked to real-world use. 

Individuals therefore still use stablecoins very little for making payments when they purchase something, while their main use is elsewhere. 

Transactions and usage of USDT and USDC stablecoins

The research, conducted by Visa and the data platform Allium Labs, highlighted that less than 10% of stablecoin transaction volumes are organic or come from real people. In fact, it revealed that the majority of stablecoin transactions involve operations on crypto exchanges, partly carried out by people and partly carried out by bots.

Note that the research only analyzed on-chain transactions, because they are public and verifiable by anyone, and not the internal exchanges within centralized exchanges. 

Overall, it has examined transactions in the month of April for a total volume of about 2.2 trillion dollars, and of these only 149 billion were related to “organic payment activities.”

Instead, the rest would be transactions related only to crypto markets, that is, exchanges for the buying and selling of cryptocurrencies or other financial assets. Among these, a good part would have been carried out by automatic bots.

It should be remembered that bots not only dominate the crypto markets, but also the traditional financial markets, and that many smart contracts operating in the decentralized finance sector carry out automatic transactions like bots. 

Nevertheless, the research has also highlighted a steady growth in the monthly active users of stablecoins, totaling 27.5 million monthly active users across all chains.

The role of USDT and USDC

Currently, the total market supply of stablecoins is around 150 billion dollars, with USDT (Tether) and USDC (USD Coin) dominating this market.

USDT now has a market share of 75%, making it by far the most widely used stablecoin in the world. USDC follows with 22%, while all other stablecoins combined do not exceed 3% of market share. 

In the crypto markets, stablecoins are more widely used than fiat currencies, even though they replicate their value. Both USDT and USDC, in fact, have a value linked to the US dollar, as they should always maintain parity and convertibility into USD. 

The main reason why stablecoins are more widely used than fiat currencies that replicate is that in the crypto markets it is much easier to move stablecoins than fiat currencies. 

Stablecoins that move to decentralized blockchains, such as Ethereum, have no limits or obstacles. Furthermore, nowadays on-chain transactions are very fast, and on some blockchains they are practically immediate.

With fiat currencies, on one hand there is the risk that transactions are not immediate, especially if carried out through bank transfer, and on the other hand they may encounter many obstacles. 

First of all, it is not allowed to transfer fiat currency directly from one exchange to another, which practically makes it impossible to use, for example, for arbitrage. Stablecoins, on the other hand, are specifically designed to facilitate arbitrage. 

Furthermore, many financial intermediaries, essential for moving fiat currency to and from crypto markets, may resist or pose obstacles to those who want to deposit or withdraw fiat currency from crypto markets. 

Finally, it should be remembered that on decentralized exchanges fiat currencies simply cannot be used, making it necessary to use stablecoins. 

The bots

In financial markets, both crypto and traditional, timing has become increasingly important in recent decades, as well as prices. 

In particular, many large operators who trade on the markets do so with extremely fast and huge quantity transactions, making it absolutely impossible to carry them out manually.

So they have been developed by bots, which now dominate the financial markets, operating with huge amounts of transactions executed in a very short time, often less than a second. 

This trend is also spreading to the crypto markets, especially when it comes to arbitrage, since each crypto exchange is isolated from the others and operates as its own environment. 

Therefore, bots are actually essential to prevent the prices of various cryptocurrencies from differing too much from one exchange to another. 

Moreover, they are the preferred trading tool of large operators, who have probably already entered the crypto markets. 

After all, cryptocurrencies are not widely used in the real world, and are often used much more for pure and simple trading.

In light of all this, it is not surprising at all that the vast majority of stablecoin transactions are not related to real-life or online payments.