Stablecoins are becoming ‘systemically important’ as market cap returns to record highs, analysts say

With bitcoin becoming increasingly institutionalized, it may soon be stablecoins' time to shine. The market cap for stablecoins — cryptocurrencies that promise a fixed value peg to another asset — has recently reached all-time-high levels after a sharp drop in 2023. Domestic and cross border payments have driven it to $170 billion currently, from just $4 billion at the start of 2020. Monthly payments in stablecoins tripled to $1.4 trillion in the 12 months leading up to July. "Stablecoins are becoming systemically important," Bernstein analyst Gautam Chhugani said in a note Thursday, adding that they are "now [the] 18th largest holder of U.S. treasury along with large sovereign holders." This could have investment implications for Robinhood down the road, he added, as it "continues integrating stablecoins for crypto trading & cross-border transfers." Bernstein has an outperform rating and $30 price target on the stock. Stablecoins — Tether and Circle's USDC dominate the market — are largely used for trading on centralized and decentralized exchanges and as collateral in decentralized finance, or DeFi. Crypto investors watch stablecoins closely for evidence of demand, liquidity and activity in the market. A recent report shows that nontrading uses for stablecoins are also growing in popularity, however, including saving money abroad in U.S. dollars, getting better currency conversion rates, earning a yield and sending money internationally. Kevin Dede, an analyst at H.C. Wainwright, said a "once-sleepy world dominated by large banks could be in for a rude awakening," in a note earlier this week, due to stablecoins' potential to eliminate intermediaries and process transactions more transparently, efficiently and cheaply. By "increasing the velocity of money and making capital both more accessible and liquid, stablecoins should accelerate economic activity and enhance financial efficiency," Dede added. JPMorgan , Goldman Sachs and Wells Fargo are all exploring stablecoin development. PayPal last year launched its own dollar-backed stablecoin, while Visa has been supporting stablecoin payments and Mastercard is supporting stablecoin wallets and other crypto card programs. At an event last week celebrating Circle moving its headquarters to New York City from Boston, Rob Goldstein, chief operating officer at BlackRock , said he has "a vision of USDC — through that New York office — being the center of finance." "Major financial players are increasingly turning to stablecoins, with regulatory clarity hopefully close behind," Dede said. "Financial services companies operate at razor thin margins, and we see stablecoins standing at the precipice of far greater adoption outside the cryptocosm in replacing legacy tech in traditional finance." — CNBC's Michael Bloom contributed reporting.