JPMorgan says rising stablecoin use may not lead to similar market cap growth

Stablecoin usage is growing fast, but this may not lead to the same level of growth in the total market capitalization of stablecoins, according to JPMorgan analysts.

The key reason is rising velocity, which means how often the same stablecoin is used in transactions. Stablecoin velocity has increased sharply over the past year, JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report, meaning the same amount of stablecoins can handle a much larger number of transactions.

“In our opinion, the more widely used stablecoin-based payment systems become, the higher their efficiency and thus their velocity,” the analysts said. “In turn, higher velocity would likely limit the expansion of the stablecoin universe going forward, even if their usage in payments rises exponentially from here.”

This is not the first time the analysts have taken a cautious view on stablecoin growth. Last December, the analysts said they do not expect the stablecoin market cap to reach trillion-dollar levels, projecting it at around $500–$600 billion by 2028. Last May, the analysts also said projections of a trillion-dollar stablecoin market by others are “far too optimistic.”

Stablecoin growth

The stablecoin market cap has increased by nearly $100 billion over the past year, the JPMorgan analysts noted, adding that the total size goes above $300 billion when including yield-bearing stablecoins.

This growth has been faster than the overall crypto market cap, suggesting that stablecoins are being used for more than just trading or as collateral within crypto, the analysts said.

Onchain stablecoin transaction volume has also grown significantly. The analysts estimate it is running at an annual pace of about $17.2 trillion this year based on year-to-date data.

The growth in transaction volume increased significantly after the passage of the GENIUS Act in the U.S. last year and reflects increasing use of stablecoins for payments, according to the analysts. 

While consumer-to-consumer payments still make up most activity, consumer-to-business and merchant payments are growing faster, the analysts said, citing a recent report from venture capital firm a16z crypto. Asia remains the dominant region for stablecoin usage, they added.

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