JPMorgan has issued a cautious outlook regarding the future of stablecoins, asserting that the sector is unlikely to reach a market valuation of $1 trillion within the next few years. Instead, the financial giant projects that the stablecoin market will grow to between $500 billion and $600 billion by 2028, closely aligned with the broader crypto market”s trajectory.
The bank”s analysts emphasize that most of the recent expansion in stablecoins is driven by trading activities, particularly in derivatives and decentralized finance (DeFi). Over the past year, the stablecoin market increased by approximately $100 billion, surpassing the $300 billion mark, with significant contributions from USDT and USDC, which grew by around $48 billion and $34 billion, respectively.
JPMorgan”s findings suggest that the demand for stablecoins is predominantly fueled by crypto market participants who utilize these digital assets for trading purposes, rather than for external payment adoption. The primary functions of stablecoins in the current landscape involve facilitating trading, engaging in DeFi lending and borrowing, and managing short-term liquidity.
Notably, the bank highlights derivatives trading as a critical factor in stablecoin demand. During the year, exchanges reportedly increased their stablecoin holdings by approximately $20 billion, driven by a rise in perpetual futures volumes. This correlation illustrates how stablecoin supply growth has mirrored overall trends in the cryptocurrency market.
Despite the increase in stablecoin usage for payments, JPMorgan argues that this does not necessitate a corresponding surge in supply. The bank points to the competition posed by tokenized deposits and central bank digital currencies (CBDCs), which are positioned to meet payment demands without requiring the stablecoin market to expand at a similar pace.
In contrast to more optimistic projections from other financial institutions, JPMorgan maintains that the current dynamics of trading-driven demand will prevent the stablecoin sector from achieving the lofty $1 trillion benchmark in the near term.
