Introduction

Stablecoins are a type of digital asset whose value is linked to that of another asset through a parity relationship.

The most popular stablecoins maintain a 1:1 relationship with the US dollar, while others do so with gold or even with other cryptocurrencies.

The first stable crypto was Tether (USDT), created by the company Tether Limited. It was released on the market in October 2014 and until 2018 it was the only one of its kind.

Methodology

In order to find the stablecoins on Algorand, we use the flipside_prod_db.algorand.prices_swap table. We then filter by tokens that have an average price between 0.99 and 1.01, and an avg(volume_usd_in_hour) > 0, as we don't want a stablecoin that has never been swapped. After running the query, we obtain the following stablecoins:

Total Monthly Transaction Volume

Let's first take a look at the total monthly transaction volume of the stablecoins in Algorand.

Stablecoins: Volume Borrowed

The following charts shows the most recent volume of Stablecoins borrowed in one of the top protocols for borrowing and lending on the Algorand blockchain: Folks Finance.

UST’s Depeg Impact

We can see that transaction volume spiked massively on October 2021, when the market started to trend upwards. The difference with the previous months went from 16k transactions/month to 446k transactions/month. With new defi opportunities like exchanges and new pools, there was a massive adoption of the Algorand blockchain, and thus the stablecois that were available on it. Since then, the number of transactions on Algorand has been increasing every two months, with a surprising trend where one month it would go up, the next one go down, and on the following it would reach a new maximum.

We can see that the volume of stablecoins has decreased during the past months. The first month has over 3 more times the amount borrowed. This was because April and May have been bad months in the cryptospace, meaning that BTC has decreased in price and most cryptos followed. When this happens, people tend to be more conservative with their money.

Let's analyze how has the impact of UST’s depeg affected the flow of funds in and out of the three main stablecoins on Algorand. To do so, let's see their daily transaction volume during May 2022, as well as their average daily volatility.

The previous chart show the monthly transaction volume for each of the 3 big stablecoins on the Algorand blockchain: STBL, USDT and USDC, since September 2021 (when there was the first spike in transaction volume). We can see that the most popular monthly stablecoin by transaction volume is USDC, which is the number 1 every month. On December 2021, STBL was launched on Algorand and it started with less transactions than the other two, but since April 2022 it has more transaction volume than USDT.

UST started depegging heavily from the dollar on May 9th, at the same time that LUNA's price was crashing. These events caused many other tokens to go down 40% - 60% in a matter of three days. We can see on May 11th and May 12th that people tried to mitigate the impact of this crash by buying more stablecoins, as nobody knew if the market would continue to keep going down. On the other hand, more risky users swapped their stablecoins for other currencies trying to catch a trend reversal that could give them huge gains.

In regards to price, USDC and USDT haven't felt any impact in price (meaning that they haven't suffered a depeg). STBL felt it a bit more, but the volatility showed in the previous table is masked, as there was an arbitrage flash swap that increased the price momentarily to 112.9$, making it look like it has depegged tremendously when in reality it is not the case.