Tuesday, July 5

“Digital dollars” abound like physical ones: stablecoins grow 400% in 2021

Key facts:
  • Driven by DeFi and transactions, there is already more than $ 150,000 in support of these tokens.

  • A major industry entrepreneur expects mass adoption for payments in 2022.

The cryptocurrency market is receiving more and more capital destined for decentralized finance, exchange on exchanges and derivatives trading. This can be inferred from the record creation of stablecoins or stablecoins that occurred over the past year.

These tokens, whose price is tied to the value of another asset such as the US dollar, had an increase of 388% in the last year. More precisely, went from a total of USD 29,000 million to more than USD 150,000 million intended to back these crypto assets, according to a report prepared and published by The Block.

The most widely used stablecoins are tether (USDT), USD Coin (USDC), DAI (DAI), USDP (USDP) and Binance USD (BUSD). Yes OK The former has been the dominant one in its field over the years, this trend began to decline in 2021.

As the graphs below indicate, tether started the year with just over $ 21 billion dollar-backed units of its cryptocurrency and ended it exceeding $ 81 billion. In other words, it almost quadrupled its volume.

But nevertheless, USD Coin had much higher growth. This stablecoin had assets blocked by more than USD 4,000 million in January 2021, while by December the amount already exceeds USD 41,000 million. That is to say, ten times higher compared to 12 months before.

Similarly, Binance USD, the stablecoin issued by the renowned exchange, had an exponential increase from 1 billion to more than 14 billion in the year.

In spite of everything, as the graph below shows, USDT is still the ‘queen’ of stablecoins. This even despite the complaints that CriptoNoticias has recently reported, in which the company Tether Holdings Limited, issuer of the token, is accused of not reliably supporting the assets of investors as claimed. Meanwhile, the US Congress is analyzing the possibility of regulating these cryptocurrencies.

Despite the narrowing gap, tether continues to dominate the stablecoin scene. Source: The Block.

Investors look for where to put their capital

The exponential growth of stablecoin issuance can be an important factor when analyzing the present and future of the cryptocurrency markets. This is so because of their nature and the role they play in the ecosystem.

Stablecurrencies are primarily used to reduce volatility when transacting. In this way, they become very useful instruments for use in exchanges – both centralized and decentralized – and in decentralized finance protocols.

Therefore, the fact that more and more funds are being allocated to the issuance of these cryptocurrencies indicates that there is a significant flow of capital “flowing” into the world of crypto assets. Even when many of them have not yet placed in any of the aforementioned options, they are ready to jump into the field when investors see it appropriate.

Likewise, as detailed in the aforementioned report, derivatives markets also make their contribution to increasing demand of these tokens. This is because many futures contracts set the price of digital assets in stablecoins, as mentioned, to avoid discrepancies caused by significant variations in the price of other cryptocurrencies such as bitcoin (BTC) or ether (ETH).

Finally, as the CEO of Circle highlights, the massive adoption of stablecoins to accept payments by many companies in 2022 can boost this growth. Circle is precisely one of the developers of USDC, the second stablecoin with the largest capitalization globally, so your opinion carries a lot of weight to see what the next year will bring.


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