When the cryptocurrency market was struck by the mid March madness that took the price of Bitcoin down to lows of $3,700 there was a lot of panic and fear about the volatility. But at the same time, the one aspect of the cryptocurrency market not governed by volatility — stablecoins — were suddenly pushed into the spotlight, and the demand matched the growth.
Now, the value of assets for all stablecoins surpassed $10 billion, having surged by over 70% in just two months. This is indicative of the renewed interest in the possibility of utilizing the technology for stable values and digital versions of fiat currency.
But, this also indicates that the interest is perhaps being taken away from Bitcoin after the steep drop in price reminded investors of the dangers of this highly volatile asset. It also shows the differentiation between the different types of assets as stablecoins are designed to be spent, but Bitcoin ,after its halving, is much more of an investable asset.
More than Bitcoin
Bitcoin has of course gone through its major reward halving which has impacted the mining space, but it has yet to really impact the market that much with the price mostly stable. But, what it has done is split the market a bit for those who want to speculative invest in Bitcoin, and those who are happy to look for use cases for stablecoin that are digital and not affected by volatility.
The stability of these stablecoins tokens is a primary advantage over using Bitcoin as the quote currency in a base trading pair, according to one analyst.
“Stablecoins have always had an edge over bitcoin as a base trading pair because of its inherent price stability,” said Aditya Das, cryptocurrency markets analyst at Brave New Coin. “Stability means traders feel safer holding a stock of it and using it as a liquidity tool for trading.”
Demand for stablecoin quote pairs in cryptocurrency spot markets has influenced derivatives products as well. For example, BitMEX, the second-largest cryptocurrency derivatives market by open interest, is keenly aware of the shift in demand for more stablecoin-denominated trading products.
“We have noticed that traders prefer to trade pairs with USD-like denominations as dominance for altcoin trading moved from XBT-based Poloniex to USD- and USDT-based Binance and Coinbase,” said Greg Dwyer, head of business development at BitMEX.