In recent months, stablecoins have grown with impressive strength, reaching an increase of almost 70% in the cryptocurrency markets.
It is estimated that this impressive growth may be due to the current crisis caused by the COVID-19 pandemic. It has generated great confusion and uncertainty among the population about the fate that awaits the world economy. Therefore, they have turned their attention to cryptocurrencies, which promise to be a safe and reliable refuge of value in times of difficulty.
Likewise, the use and acceptance of stablecoins by businesses and merchants has favored the implementation of these currencies.
For its part, according to the analyses carried out by cryptocurrency exchange houses, it is estimated that the greatest adoption of stablecoins comes from the Tether (USDT). Which represents almost 90% of the total supply of stablecoins that exist today. It is worth mentioning that Tether is backed 1:1 against the US dollar.
Likewise, the growth in investment levels in blockchain, in other developing technologies and in cryptocurrencies in general, favors greater adoption of stablecoins.
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Stablecoin growth predominates in Asia
It is estimated that Binance y Huobi are the largest markets where the highest volume and use of Tether can be seen worldwide. Information that was confirmed by Su Zhu, CEO of Three Arrows Capital. One of the largest investment fund managers in existence.
Zhu confirmed that the biggest movement of stablecoins like Tether comes from Asia, where the use of USDT predominates over many other currencies. Also, since both exchanges (Binance and Huobi) have a wide range of stablecoins available, they have become the favorites of many to make their exchanges. Where they can trade cryptocurrencies like Bitcoin and Ethereum and exchange them for stablecoins like Tether or fiat money or vice versa.
In this same sense, the CEO of CircleJeremy Allaire also pointed out that stablecoins were experiencing a moment of explosive interest and great growth. He also specified that the participation of commercial actors who demand the use of stablecoins is increasing every day. As a way to achieve stability, security and utility through a form related to the digital dollar.
“We are getting feedback from Asian market participants that there is increasing demand for stablecoins from small and medium-sized businesses that are looking for both the security and utility of the digital dollar.”
In this context, Allaire refers to the stability that small and medium-sized merchants can have by having stablecoins. These have a stable backing against the dollar. And they do not suffer from the volatility still typical within cryptocurrencies such as Bitcoin. Therefore, they can use them with greater confidence as a form of liquidity to market their products or services.
What are stablecoins?
Stablecoins are a type of digital currency created to counteract the typical volatility within cryptocurrencies. This can cause a constant rise and fall in the price of the latter. For this reason, stablecoins, also known as stable coins, were developed as a stable alternative to operate within crypto markets and exchanges.
To achieve stability in their price and value, stablecoins are backed by financial assets. This can vary between fiat money, precious metals and other raw materials. There are even stablecoins that are backed by other cryptocurrencies. Such is the case of Dai, which is a stablecoin backed by Ethereum.
Likewise, another objective sought with the implementation of stablecoins is to achieve greater adoption of cryptocurrencies. Stablecoins, by solving the problem of volatility that can cause concern and uncertainty in users, can favor the adoption of cryptocurrencies. Awakening the interest and motivation of these users for cryptographic assets.
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Tether's market cap has increased over the past 6 months
Once the concept of stablecoin has been clarified, we can move on to studying the growth that Tether has had as a stablecoin in the market over the last few months. According to analyses carried out by skew, a cryptocurrency and stablecoin analytics and statistics company, Tether has seen tremendous growth relative to Bitcoin.
Source: analytics.skew.com
The data shown in the graph demonstrates that the stablecoin has achieved a constant and systematic increase in relation to the price of Bitcoin in recent months. An event that is related to the dramatic fall suffered by the cryptocurrency markets during the aforementioned Black thursday. Which occurred on April 9 of this year following the bankruptcy declaration of several US exchanges. And which caused a historic decline in the prices of Bitcoin and other cryptocurrencies.
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