Stablecoins have reached an all time high across exchanges, according to a report published by an analytics provider. In the report by Crypto Quant, stablecoin holdings across exchanges have hit an all time high, with the total amount of coins reaching $10 billion over the past few months.
These pegged digital currencies arose as a solution to the volatility of cryptocurrencies and rose to prominence in 2018 during a bearish year. Their value is pegged to fiat currencies which reduces the volatility to that of existing currencies such as US dollars, Pound Sterling, or the Euro.
Stablecoins were initially used as a way to exit positions in volatile cryptocurrencies without the inconvenience of converting back to fiat. However the applications of stablecoins has expanded into many potential areas such as e-commerce, banking back-ends, and potentially undergirding credit cards.
While Tether's USDT is the dominant stablecoin on the market at the moment, there are three key players; Tether, Circle’s USDC, and Binance dollar, totalling over $54 billion in market cap. The increase in stablecoins that are currently sitting on exchanges could signify a potential bull run as holders prepare to invest in more crypto assets, and could send the markets racing upwards.
The sharp uptick of stablecoins in early 2021 could be a sign that there is going to be another bullrun, and is also an expression of how recent corporate activity has influenced the space. With the US Treasury OCC (Office of the Comptroller of the Currency) recently publishing new guidelines for banks to use public blockchains and stablecoins, it seems that banks are preparing to get involved with stablecoins.
Banks could decide to create their own stablecoins, as we have seen with many world banks trialling central bank digital currencies (CBDC), as a response to threats from digital currencies And in 2019 JP Morgan introduced its stablecoin JPM Coin.
Once a tool to provide cryptocurrency traders with a quick exit strategy, stablecoins have evolved and have begun to be adopted by mainstream corporate finance. Stablecoins are viewed favourably by regulatory bodies, compared to other cryptocurrencies, and they are quickly being viewed as a potential digital currency for governments across the world.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.