Spot ETF Looms As Stablecoin Supply Soars #NewsETFs

January made for an auspicious start to 2025 for cryptocurrency investors around the world. None more so than for those with a vested interest in Solana ($SOL). Over the weekend, it was reported that blockchain doubled its stablecoin supply to $10 billion. While the network has seen steady growth over the past year, issuance of viral memecoinsTRUMP and MELANIA, have been cited as among the most popular drivers of the network’s growth.

The growth in stablecoin issuance signals rapidly growing acceptance of the blockchain by institutional cryptocurrency investors and traders. Over the past year, Solana’s market cap has almost tripled from $47 billion at the start of 2024 to over $110 billion in most recent trading, according to CoinMarketCap.

Stablecoins: The Foundation

Stablecoins are a unique type of crypto designed to maintain a “stable” value. While a number of mechanisms have been proposed to maintain this stability, the collapse of Terraform Labs’ TerraUSD stablecoin brought to light the perils of algorithmic stablecoins. Likewise, it’s important to note that like other financial assets, stablecoins became highly correlated to other asset classes in the wake of high market volatility. In March 2023, USDC “broke the buck” in the wake of the collapse of SVB and Silvergate Bank.

Today, total stablecoin market cap is over $223 billion, marking a 36% increase since August 2024. While various sources claim the existence of over 200 stablecoins, Tether’s USDT and Circle’s USDC, account for 86% of the market. USDT, alone accounts for 62% of stablecoin market cap.

Today, over 75% of stablecoins rely on collateralization of an underlying asset (fiat, commodities, and in some instances other cryptocurrencies. A September 2024 Castle Island report revealed that over 98% of the stablecoin market is denominated in USD.

On-Ramps and Off-Ramps

For cryptocurrency traders and investors, stablecoins play an integral role. Before any transaction on a blockchain can occur, parties must ensure they have funds available for investment in assets onchain.

Investors on-ramp by converting their fiat into some sort of cryptocurrency, usually a stablecoin while they decide on an asset to purchase or align key parts of a more complex trade. Off-ramping occurs when users convert their cryptocurrency back into fiat currency.

In both operations, stablecoins are often the intermediary vehicle that market participants utilize to preserve the value of their investment in a more stable instrument before they trade in more volatile cryptocurrencies and trading pairs.

Network Participation

Given their central role in the execution of cryptocurrency trades, stablecoin activity can be a leading indicator to the breadth and depth of crypto trading on various networks. As interest in cryptocurrency has grown, so have the number of stablecoin projects. In 2021, there were 27 stablecoins. By July 2024, there were 182 stablecoin projects according to DeSpread Research, a 574% growth rate over three years.

Solana’s meteoric month was driven by the minting of $8.5 billion in USDC in January, doubling the total stablecoin market value on the network, outpacing Ethereum (the long-time incumbent) over the same time period.

Total Stablecoin Supply

Blockchain Dec 2024 Jan 2025 Growth (%)

Ethereum $13.5 billion $14.1 billion 4.44%

Solana $ 5.0 billion $11 billion 120%

Institutional Trading and Investment of Crypto

In addition to total issuance, Solana set consecutive daily records for decentralized exchange (DEX) activity with $28.2 billion of activity on January 18 and $39.2 billion of activity on January 19, coincident with the launch of TRUMP and MELANIA meme coins.

This rapid growth of stablecoin issuance and trading activity is extremely relevant given Solana’s pitch to institutional users. Enhanced liquidity on the Solana blockchain could translate into lower transaction costs, increasing further institutional adoption.

Payments

While the network boasts a benchmark throughput of 65,000 transactions per second, a December 2024 upgrade, enabled the network to process over 5,000 transactions per second across 2,000 globally distributed nodes.To put this into perspective, Visa processed 212.5 billion transactions in 2023 at a rate of 6,741 transactions per second.

Taking into account merchant fees that can range from 2.0-3.0% of transaction value, the relevance of an efficient onchain solution becomes even more relevant. Consisting of a based and priority fee, a single transaction on Solana costs roughly $.00025.

Memecoins Divide Cryptocurrency Community

No current discussion on Solana would be complete without touching on the catalyst that sparked mainstream interest in the network. The TRUMP and MELANIA memecoins, launched on Solana just prior to President Trump’s second inauguration, divided the crypto community with skeptics cringing from the memecoin’s “horrible look.”

Others, however, felt that TRUMP opened a window of possibility for more companies to leverage cryptocurrency as a viable capital raising and customer acquisition tool. Memecoins, often characterized by their viral nature, have a history of generating substantial trading volumes and attracting new investors to the market.

Within 48 hours of its launch on the Solana blockchain, TRUMP’s market capitalization reached $14 billion–fueled by a perfect storm of speculative trading, social media hype, and the renewed polish of the Trump brand.

Cryptocurrency Forward Progress

While memecoin activity on Solana may have simultaneously driven a spectacular surge in transaction volume and heated debate within the crypto community, it highlights the broader acceptance and adaptation of Solana as a viable enterprise-grade blockchain and cryptocurrency. An accommodative administration and favorable tax treatment in the space could further accelerate San Francisco-based Solana’s meteoric rise.

Over the past day, institutional investors like Bitwise, 21Shares, and VanEck refiled applications for a Solana ETF after being rejected last year.

The increased issuance of stablecoins on the network underscores Solana’s potential beyond just memecoins. Showcasing its capabilities in institutional trading, investment, and payment applications, Solana has distinguished itself as a legitimate contender to rival cryptocurrencey giants Bitcoin and Ethereum. The network’s high throughput, low transaction costs, and scalability make it an attractive option for a wide range of financial applications.