Stablecoin turnover has significantly increased over the last two years, coinciding with the growth of AI payments and new applications within traditional finance (TradFi). Despite this activity, Standard Chartered analysts maintain their forecast that the overall stablecoin market will eventually reach a valuation of $2 trillion.

Impact of Stablecoin Velocity on Supply Demand

Standard Chartered analysts have presented a key finding: rising stablecoin velocity could temper the demand for new token issuance, even as overall transaction volumes continue to climb. Velocity, which measures how frequently outstanding stablecoins are used, has doubled over the past two years, according to a report seen by Cointelegraph on Tuesday.

Understanding Velocity and Its Implications

Faster turnover means that a greater volume of transactions can be supported without necessitating a proportional increase in the total supply of stablecoins outstanding. Geoff Kendrick, Standard Chartered’s head of crypto research, explained this dynamic.

"If velocity remains constant, rising transactions will create demand for more stablecoins, but if it increases, that will not be the case," Kendrick stated. This observation marks a departure from the bank's prior assumption that velocity would remain stable during market expansion.

Kendrick elaborated that an increase in velocity is expected to "reduce the need for the total number of stablecoins required."

Drivers Behind Increased Stablecoin Velocity

The analyst indicated that the observed spike in velocity appears linked to a gradual shift in how stablecoins are being utilized. This shift favors higher-velocity use cases, specifically those related to TradFi replacement and transactions involving artificial intelligence (AI).

Conversely, Kendrick noted that there has been no corresponding increase in velocity for pre-existing uses, such as savings held in emerging markets. The average monthly turnover has reached at least six times, driven largely by the activity surrounding Circle’s USDC.

Divergence Between Major Stablecoins

The velocity for USDC began accelerating across all chains, particularly on Solana and Base, starting in mid-2024. This trend highlights the movement toward TradFi applications.

In contrast, the velocity for Tether’s USDT has remained relatively low. This reflects USDT’s stronger positioning within the lower-velocity use case of emerging market savings. Kendrick concluded that the two leading stablecoins exhibit distinct strengths based on their primary use cases.

"In other words, the two market leaders appear to have different strengths by use case — EM savings for USDT and TradFi replacement for USDC," he added.