As the new COVID-19 stimulus package is discussed in the U.S. Senate and Bitcoin (BTC) begins to rebound from its lowest volatility lows, demand for stable currencies continues to grow. Thanks to the stability they offer to token holders and the demand from decentralized financial lending and revenue growth, stablecoins – particularly USDT – continue to hold record numbers.
According to a report from cryptocurrency research and data firm Messari, USDT could soon become the cryptocurrency with the largest daily transaction volume in US dollars, carried across all blockchains that support Tether. According to Ryan Watkins, Messari Research Analyst, this could happen sooner rather than later. He told Cointelegraph, “It is certain that USDT Bitcoin could tip Bitcoin in August and, if not, soon thereafter. The stablecoin as a whole has already tipped Bitcoin in transaction volume.”
Daily transaction value of Bitcoin vs Tether
While the USDT and some other dollar-related tokens like Binance USD (BUSD) or USD Coin (USDC) have been leading the growth of stablecoins, even commodity-based stablecoins have gained momentum recently. Tether’s new gold-backed stablecoin, Tether Gold (XAUT), is seeing soaring demand as the underlying commodity recently surpassed the $ 1,900 mark – a number gold hasn’t seen since September 2011 – and even hit nearly $ 2,000 . . .
Issuing a stable currency and high volume
Although stable currency volumes like most cryptocurrency markets stagnated for most of the summer, there has been a significant spike in the trading volume of USDT and other stable dollar-based currencies, particularly Binance’s BUSD, in recent days.
Major competitor with dollar support, stablecoin – 24 hour volume
Although the stable coin volume has rallied recently, it is still a long way from its all-time high in March. However, the collective market capitalization of all stock-based stablecoins has risen continuously. It rose $ 3.8 billion in the second quarter of 2020 and topped $ 13.4 billion at the time of writing.
USDT alone is responsible for $ 11 billion of the aforementioned $ 13.4 billion, having just hit $ 10 billion on July 22. This means that USDT’s market cap has more than doubled by $ 5 billion since March. In fact, Ripple’s Tether XRP temporarily overtakes it and becomes the third largest cryptocurrency in the market.
After USDT, the US Dollar Circle is the second largest stable coin, as it became Tether’s first competitor to surpass the $ 1 billion market capitalization in early July. On the flip side, Binance USD was the fastest growing stable currency in 2020, according to Mesari.
Why is there a demand?
According to Edo Sade Mann, founder of Saga Monetary Technologies, told Cointelegraph, the demand for stable and secure assets like the US dollar could be the biggest driver of stablecoin’s success in the first half of 2020: “The attractiveness of stable currencies is simple: they seem Promise Stability – Given the economic turmoil of 2020, it’s understandable why they’re getting a lot of attention. “”
When Bitcoin topped $ 11,000 on July 26th and 27th, exchange rates for USDT peaked in 2020, indicating buying pressure on BTC and other cryptocurrencies. This is also helped by the lower bitcoin balance currently held by major exchanges. In fact, the activity of the three largest stable currencies – USDT, Dai and USDC – has increased significantly over this period.
On the other hand, the explosive growth in activity and stable value in stable coins is not due to user conversions or remittances, but rather to exchange adjustments, as noted by Watkins. He told Cointelegraph, “The majority of stablecoin activity is driven by the settlement of exchanges. Maybe somewhere in the 90 +% range. Although DeFi’s activity is definitely increasing. “”
Challenges and risks
As stablecoins grow on all fronts, there are still challenges and risks to consider. For example, the stable currencies pegged to the dollar, along with the dollar itself, have lost more than 28% of their value as the US Federal Reserve continues to print money. Some stablecoin issuers solve this problem by pegging a stable currency to multiple currencies instead of just one, as Sde Mann notes.