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Stablecoin supply has doubled to 12 billion since the crypto market’s March crash
NEW YORK, July 14, 2020 (GLOBE NEWSWIRE) — The supply of stablecoins is growing at its fastest pace ever since the March 12 cryptocurrency crash, according to a new report titled The Rise of Stablecoins from Bitstamp and Coin Metrics. While it took five years for stablecoins to reach a supply of 6 billion, it took just four months this year, from March to July, for that supply to double to 12 billion. The report looks at the impact that this explosive growth may have on the overall cryptocurrency market.
Increased demand since March 12
During times of volatility, Coin Metrics notes that the demand for stablecoins increases as investors seek safe-haven assets. On March 12, 2020, the cryptocurrency market crashed, spurred in part, by a large sell-off in the global markets due to fears over COVID-19. During this rush to cash-out, Bitcoin prices dropped by 50 percent – the largest one-day price drop since 2013.
After March 12, demand for stablecoins increased dramatically as investors sought safety and wanted to keep money parked on the sideline without incurring fees associated with trading into fiat currency.
Stablecoin opportunities after the crash
In March, most stablecoins increased above their typical $1 price range due to demand, including USDC, USDT, PAX, BUSD, and HUSD. All except USDT’s price returned to their $1 pegs within days. USDT remained higher through May, creating arbitrage opportunities.
“We saw USDT_ETH supply, in particular, explode when the price rose above $1 in March,” said Coin Metrics Senior Research Analyst, Nate Maddrey. “Using our free float metric, we can see that new USDT_ETH supply diminished in May as the price dipped back toward $1.”
The new report also illustrates that the vast majority of the amount of USDT_ETH held by large addresses increased by a huge amount in late March and April, which suggests exchanges began holding larger amounts of stablecoins. This could also account for exchanges converting fiat into stablecoins.
The benefits of stablecoins moving forward
Compared to Bitcoin (BTC) and Ether (ETH), stablecoins are being exchanged relatively frequently. Stablecoins are exchanged 5-10 times as frequently as BTC and ETH. While BTC and ETH velocities are between 4 and 6, stablecoin velocities mostly range between 25 and 50. For the first time, in June 2020, the amount of value transferred using stablecoins exceeded the amount transferred using BTC.
As the use of stablecoins continues to increase, Coin Metrics’ analysts believe they could serve as a gateway for more crypto users, especially in countries with restrictive policies on crypto asset trading.
Stablecoins are easy to move globally, allowing for use as cross-border payments. Stablecoins offer a way to transfer money between exchanges and to offer settlement functionality without relying on traditional wire transfers. For many exchanges, stablecoins are used as a quote currency in crypto asset trading pairs far more than fiat currencies.
As more investors see the advantages of stablecoins, this could lead to further growth for other digital assets, such as BTC and ETH. However, Coin Metrics does reference the Financial Action Task Force’s July 7 announcement seeking closer monitoring of stablecoins to prevent money laundering and other illicit activity. The impact of a regulatory crackdown has yet to be seen, but it could result in fewer OTC desk and arbitrage opportunities.
“This report illustrates the rapid growth of stablecoins and their value across trading, payments and other important use cases,” said Ben Pousty, US Marketing Lead at Bitstamp. “We hope the detailed data and findings in this report serve to educate and further the broader discussion around stablecoins.”
To view a full copy of the report, visit: https://coinmetrics.io/the-rise-of-stablecoins/
Bitstamp is the world’s longest-running cryptocurrency exchange, continuously supporting the crypto economy since 2011. With a proven track record and mature approach to the industry, Bitstamp provides a secure and transparent trading venue to over four million individuals and enables a range of institutional partners to enter crypto markets through their time-proven infrastructure. Whether it is through their intuitive web and mobile apps or arsenal of industry-leading APIs, Bitstamp is where crypto enters the world of finance.
For more information, visit bitstamp.net.
About Coin Metrics
Coin Metrics is a leading provider of transparent and actionable crypto asset market and network data. Coin Metrics delivers mature data across multiple formats to various industry stakeholders, including financial enterprises, funds, media and research outlets, and data/application providers. Coin Metrics’ data empowers people to make informed crypto financial decisions.
For more information visit coinmetrics.io.
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