Circle CEO: Stablecoin Market At Least $120 Trillion

Like most things in cryptocurrency, the stablecoin market is still in its infancy. Over the next decade, we certainly will see evolution that makes the idea of "programmable money" interwoven deeper into our lives. It is another area where the technological trend is in operation.

Jeremy Allaire is the founder and CEO of Circle. It is the company behind the second largest stablecoin, USDC. He understands the importance of this market and how large it truly is.

Over the past few weeks, we discussed some of the potential of the Hive Backed Dollar (HBD). When watching a recent interview with Allaire, it was confirmed, based upon his views, how large this can actually be.

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Everything Is Bigger Online

There is a saying in the United States: Everything is bigger in Texas.

We can adapt that to the online world. Whatever exists in the physical realm grows by an order of magnitude when dealing in the digital world. This applies to information, communication, and number of individuals. We use the term "exponential" for a reason.

Since the introduction of the Internet, there was a massive explosion in all the abovementioned areas. There is now more information available to use than we could consume in 10,000 lifetimes. Of course, it keeps expanding on a daily basis. What was scarce in the past is now to the point where it is overwhelming.

We also have to take note that the majority of it is completely free. While there are some paywalls, much of what is out there is open to everyone. That is another radical shift compared to the past where most information was paid for, especially in the print world.

The Internet now has come to money.

This is an idea that we covered in the past so it is not really that novel. Nevertheless, as the same mechanisms that drove information and communication to explode is applied to money, we are going to see the same results.

Trillions In Stablecoins

How big is the potential stablecoin market? Using the thought process from the preceding section, much bigger than we think.

According to the interview, Allaire said the TAM (total addressable market) at least $120 trillion, the value of the global M2 money supply. Of course, it is a mistake to equate the size of something in our present system to that in the digital world.

The novelty of stablecoins and Decentralized Finance (DeFi) means we are not very advanced with the platforms. This is going to change over the next few years. At present, we are dealing with individuals. Businesses are still largely absent. However, we know many low-risk application where people can use stablecoins to earn anywhere from 6%-10% (annual rate) on their short-term capital. That is not something we see in the present system.

When businesses find out about this, we are going to see a massive explosion in the number of transactions. In fact, this is also in keeping with what we see in the digital realm.

Consider the number of global transactions: What do we think it will look like in this new world that is being created?

According to Allaire, it is going to explode:

At least 1,000x increase in the network of output payments transactions

Presently, the cost of an electronic payment transaction is 89 cents (in 2020).

So what happens when storing and transmitting value and exchange value where the cost of that goes to zero and it becomes programmable?

It only stands to reason that the number of transactions, along with the total value, is going to explode. We can already see this to a degree in the early days of blockchain financial activities. DeFi is being integrated into a lot of non-financial applications such as social media. Suddenly, many transactions have financial value that can be transferred.

Ironic that Hive already provides some of what Allaire is referring to.

Non-Competitive Environment

We are ingrained in thinking about competition. In a world of scarcity, one wins most often at the expense of someone else. Where there is finite, things needs to be divided up. That means when one gains, another suffers decrease.

Naturally, we take bring this mindset into cryptocurrency. The challenge with this is the digital realm is not finite. At the core, the processing capability of these entire medium will double over the next few years. At the same time, the speed of our communication systems only gets faster. Finally, the entire world gets less expensive to operate, on a per unit basis, from what was available in the previous decade.

Data is another area that going counter to the "traditional model". The rate of growth of data generation is enormous.

Big data growth statistics reveal that data creation will be over 180 zettabytes by 2025. That will be about 118.8 zettabytes more than in 2020.

So it is predicted we are going from around 62 zettabytes to 180 in the next 5 years. If correct, that is almost a tripling of the data that will be created.

Of course, what we do with all this data is also important.

Big data stats show that the creation, capturing, copying, and consumption of data went up by a whopping 5000% between 2010 and 2020. To be more precise, data usage increased from 1.2 trillion gigabytes to almost 60 trillion gigabytes.

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This all defies the scarcity model. With data increasing at such a rate, you would think it becomes less valuable. Yet, as we know, the value of data keeps skyrocketing. It is why almost every institution is out there garnering, processing, and mapping out whatever they can. Somehow, the more abundance we create in this area, the greater the value.

The Internet now came to money.

With stablecoins, we are not going to see just one or two winners. Here we are going to see many different projects excelling. It is all going to depend upon what the users require.

In other words, there are going to be many ways money is programmed. Algorithmic stablecoins are going to become very popular as people experiment with alternatives in this realm. This will allow for collateralization in ways we never saw before.

It is likely the total stablecoin market far surpasses that of the present M2 money supply. A great deal of that number is bank instruments that are used within the confines of that system. None of that is available to the average person.

In the world of cryptocurrency, anyone can operate like a bank. Hence, financial instruments can be developed between individuals or businesses much in the same was as banks operate. The transferring and storing of value is going to become more important as the number of transactions keep increasing.

Here is where we see the golden opportunity. The stablecoin market is one that offers enormous potential. Hence, those entities that are involved in it are going to far very well.

If Allaire is correct, we are going to see the number of financial transactions 1,000X over the next couple decades. Hopefully, this gives us a radically different viewpoint of the potential of this industry.

Here is the full-interview with the CEO of Circle:

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