Today, as Bitcoin rests around $5000 and saddened investors are looking at a whole lot of red in both crypto and fiat markets, one type of cryptocurrency seems to be doing relatively well – that’s stablecoins.
This morning, amid market turmoil, Samuel Haig at Cointelegraph reports on the growth of various major stablecoins usually seen by investors as watered-down versions of truly decentralized digital assets.
Haig chronicles how stablecoins like Tether and Circle USD have gained standing in the crypto market, even as the underlying assets take a beating.
“The largest-stablecoin by capitalization, Tether (USDT), currently ranks as the fourth-largest cryptocurrency with a market cap of $4.66 billion,” Haig writes. “Despite the total USDT market cap growing by just 0.5% in four weeks, Tether has crept up the ladder since ranking seventh by capitalization on Feb. 15. However, due to the plummeting prices of the assets that USDT is traded against, Tether volume has fallen 20% from $48 billion to $60 billion over the same period.”
Another gainer in terms of market share is TrueUSD which has gone from the 60th to the 35th largest crypto asset over a few days.
Then there’s Binance USD, related to one of the most popular crypto exchanges and the vision of Changpeng Zhao, that also saw big volume increases this month.
The argument for stablecoins in today’s market seems to be that with equity markets faltering, and decentralized crypto markets promising massive volatility, it makes sense to move toward a stablecoin that’s pegged against the fiat currency as a sort of “third way.”
In some key senses, you could say that stablecoins are kind of like cash in some regards. There’s less risk and more stability, hence the name.
“There’s nothing technical keeping the price of stablecoins at a fixed value,” wrote Greig Paul at Cryptonews during a prior BTC crash in December of 2018, noting the appeal of stablecoins while including the disclaimer that their value stability is not ironclad. “If people lose confidence that the issuer has enough assets reserved to honour the value of all coins if redeemed, it could lead to significant price variations. The price could also rise if demand outstrips supply of a stablecoin. … The recent crash of Bitcoin and other cryptocurrencies, alongside inconsistent trading prices across exchanges, have influenced the perception that cryptocurrencies are unpredictable. The idea of a cryptocurrency with a fixed value has understandable appeal, especially among those wanting to make purchases with cryptocurrencies.”
We’ll see where the market goes this week.
