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BitcoinBTC, ethereum and the broader crypto market has rebounded this year (with China making a “significant” crypto flip).
The bitcoin price has rocketed to around $30,000 per bitcoin this year, doubling from its late 2022 lows, and helping other top ten cryptocurrencies ethereum, BNBBNB, XRPXRP, cardano, dogecoin, litecoin, solana, tron and shiba inu soar as Tesla billionaire Elon Musk sparks wild speculation he could be about to blow up the crypto market.
Now, after payments giant PayPalPYPL launched its own stablecoin this week, Bernstein analysts have called stablecoins the “monster crypto killer-app” that could catapult the $125 billion market to almost $3 trillion in just five years—coming alongside a “leak” that revealed BlackRock’s bitcoin plan.
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“We expect major global financial and consumer platforms to issue co-branded stablecoins to power value exchange on their platforms,” Bernstein’s Gautam Chhugani wrote in a note seen by CNBC this week. “Going forward, we expect tokenized stablecoins to be a $2.8 trillion market, led by regulated, onshore stablecoins.”
Stablecoins—cryptocurrencies that are price “pegged” to a traditional currencies or assets, typically the U.S. dollar—will become a “growth flywheel,” according to Gautam, creating “the monster crypto killer-app” and “hyper-fast financial settlement layer.”
“We expect these revenues to be shared with their consumer partners, making co-branded stablecoins attractive for new platforms,” Chhugani wrote. “We expect this profit pool to become increasingly on-shore, regulated and shared between consumer distribution partners.”
Gautam pointed to Singapore, Hong Kong and Japan all leaning into stablecoins, with the technology finding “more political support than crypto regulation” more broadly.
The stablecoin market is currently dominated by Tether’s USDTUSDT and Circle’s USDCUSDC, worth $83 billion and $26 billion, respectively. The controversial Tether has long been accused of operating without transparency, even as it books massive profits, while Circle’s USDC briefly lost its dollar peg earlier this year after being caught up in the U.S. regional banking crisis.
Some have argued Tether’s USDT was behind bitcoin’s huge 2017 price rally, suggesting a potential link between the size of the stablecoin market and bitcoin price.
PayPal’s PYUSD, built on the ethereum blockchain, is the first stablecoin to be launched by a fully-regulated major financial company in the U.S., with the announcement sparking expectations other financial and Wall Street giants could follow suit.
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“The PayPal stablecoin launch is a testament to the fact that both crypto and the TradFi ecosystem can indeed co-exist efficiently,” Alex Vasiliev, Co-Founder and CCO at the global payments platform Mercuryo, said in emailed comments, calling its launch “a watershed moment.”
“The evolution of the crypto industry is gradual but certain and while PayPal might be extending its pioneering move as a big backer of digital currency innovations, I am certain that more mainstream fintech companies will also follow the firm in the long term.”
“Companies like PayPal can offer cheap, effective ways to bridge the two worlds, and I’m thrilled by the prospect of them doing so. Their offering a stablecoin on Ethereum is also a huge vote of confidence for the ecosystem and a signal that traditional players will increasingly be moving into the space,” Andy Bromberg, cofounder of crypto exchange CoinList and chief executive of the a16z-backed crypto company Eco, said via email.
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I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com.
Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.
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