Stablecoins have doubled their capitalization up to $12 billion after the March crypto market collapse.
Increasing demand for stablecoins.
According to the new report entitled “Bitstamp and Coin Metrics stable coins growth”, the demand for stablecoins is rising at the fastest rate since the market collapse on March, 12th.
Despite the fact that it took 5 years for stablecoins to reach $6 billion supply, this time they managed to double it in just four months. The report considers the impact this explosive growth may have on the global crypto market.
As Coin Metrics underlines, in the periods of instability demand for stable coins increases as investors are looking for some store of value.
On 12 March, 2020, the market collapsed partially due to big sales on global markets because of rumors about COVID-19.
During this rapid cashing, BTC price dropped by 50% – the biggest one-day decline since 2013. This is when the means for stablecoins started to increase as investors aimed for higher security and wanted to keep their money in some safe heaven without any fees associated with fiat trading.
Opportunities arising after the collapse. This March most stablecoins, including USDC, USDT, PAX, BUSD and HUSD have surpassed their standard price range of $1 due to high demand. All of them apart from USDT, have turned back to $1 in a few days. USDT was the only one to remain higher in May creating arbitrate possibilities.
“We saw that USDT-ETH supply surged when the price exceeded $1”, said Neil Maddrey, senior Coin Metrics analyst, “considering our free circulation metrics, we see that the new USDT-ETH supply decreased in May when the price declined back to $1”. The survey also illustrates that large USDT amounts held by major investors increased significantly in March and April, which is a sign of that exchanges are now keeping a lot of money in stablecoins. This can also be the reason for exchanging fiat for stablecoins. Future assets benefits
Future assets benefits.
In comparison to BTC and ETH, stablecoins are exchanges more often – about 5-6 times more often that the above mentioned cryptos. While BTC and ETH transaction frequency is in the range of 4-6, for stablecoins this value is between 25-50.
In June, 2020, the amount of money transferred via the asset, exceeded the sums transferred via BTC. As stablecoins usage is growing, Coin Metrics analysts suppose that they can attract more crypto users, especially in countries with restrictive policy for crypto trading. Stablecoins can easily be transferred around the world, and this makes it possible to use them in cross border payments. These coins offer a way of transferring funds between exchanges without relying in traditional banking systems.
For many exchanges, stablecoins serve as a quote currency in pairs dealing with crypto assets more often than printed money.
As more and more investors understand the benefits of stablecoins, this may lead to further growth of other digital assets like BTC and ETH. Nevertheless, Coin Metrics refers to FATF announcement dated by July, 7th, which indicates the need for closer monitoring of this type of assets for preventing money laundering and other illegal activities.
We have yet to see the impact of these regulatory measures but they can possibly lead to reduction of over-the-counter and arbitrary opportunities.
The report illustrates rapid increase of stablecoins, their value in trading, payments and other use cases”, said Ben Pausti, the head of marketing department at Bitstamp, USA, “we hope that these data and assumptions included in the report will lead to new discussion on stable coins”.