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A Lesson in Volatility: The Rise of the Stablecoin?

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Bitcoin, and Bitcoiners, have always had a fascinating relationship with the volatility that is famed with the coin. It was the reason that so much interest was paid to the cryptocurrency in 2017 when the price of Bitcoin started to rise. However, it has always been a double-edged sword. 

High volatility means that the asset is immediately high risk, and high reward. People enjoy these types of assets as there is usually a lot of money to be made, and in a short space of time. But, when there is money to be lost, it can be catastrophic. 

This will be fresh in the minds of many investors that have come to the Bitcoin market, both in the 2017 rush, and the more recent 2020 market recovery. The most recent fall in Bitcoin’s price is almost unprecedented and has shown the darker side of volatility. 

However, out of the gloom of the market collapse there has emerged one sector of the space that has come good, that of stablecoins. Stablecoins have come to find a niche in the crypto market for those who appreciate the value of the blockchain technology and crypto space, but have no interest in the volatility.

Capturing the market share

Because the value of stablecoins is tied to other assets — such as the US Dollar, the losses seen on these assets have been minimal in comparison to stocks, cryptos, and even gold. There are now six stablecoins that have forced their way into the top fifty of the market cap in the ecosystem. 

Still right at the top is USDT, from Tether, the well-known, and often controversial stablecoin, is fourth in terms of market cap with $4.6 billion. This coin has always had an important role to play in the crypto market, as it was often the most traded coin on any given day, and now suddenly has a much more vital spot. 

Circle’s USD Coin (USDC) has made big moves as well, climbing from the 30th-ranked currency with a capitalization of $430 million to place 17th with a market cap of $601.5 million today. 

Jeremy Allaire, the co-founder and CEO of Circle, took to Twitter to celebrate USDC’s now 40% gain in capitalization over the past month, stating:

“USDC surging in market demand over the past days, reaching new ATH at $568m in circulation. Fascinating to see ‘flight to safety’ within the crypto macro market, but also demand for high quality USD liquidity for markets. While not as exciting to see markets so crushed, it’s still rewarding to see that this entirely new, entirely digital, blockchain based monetary infrastructure is working.”

A new direction?

Aside from the investment facet of Bitcoin and cryptocurrency, there is a lot that can be taken from a strong stablecoin market. Bitcoin had been struggling to find its direction ever since it moved away from being a currency, but perhaps this collapse has highlighted a new direction for crypto — towards stable value. 

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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