As Coronavirus fears startled the crypto market over the weekend, cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) and most of the other coins out there were down more than 20-30% with BTC dropping below $5000 at one point. The economic recession spread throughout the entire financial sector as a whole including the stock market.
Safe have assets like bitcoin and gold, the best of both worlds, failed to perform with both falling prey to the absence of liquidity in the market. Gold futures have fallen 4.25% and Silver is down 8% in 24 hours in some markets. Compared to Gold, BTC is down close to 50% since January, while Gold is down 10%.
Stablecoins lead the way
However, the dollar-backed stablecoin market went against the market with major stablecoins like Tether (USDT), TrueUSD, USD Coin, Paxos, and Gemini, all seeing spike in prices and trading volume over the weekend. USDT reached new highs as it surpassed a total market capitalization of $5 billion. Other stablecoins in the group also displayed similar moves.
Interest in the stablecoins rising during the outbreak of the coronavirus can be attributed to the fact that stablecoins are much less volatile than digital coins. This feature tends to boost investor confidence in these digital assets. People across the globe are using stablecoins amid virus outbreak to act as a store of wealth, while also using them as a mode of payment in addition to accomplishing a number of other tasks.
Volatility in the crypto space is often what keeps investors away from the market. No one wants to send their friends some money and have the value drop after they’ve sent it. Stablecoins tend to fix the volatility problem by pegging the price of the coin to another physical asset.
Furthermore, Circle CEO Jeremy Allaire, who’s an avid backer of stablecoins, took to Twitter to note that the Circle and Coinbase project USDC has been experiencing increased demand sine the market crash on Thursday and the circulating supply of the token rose to $568 million. He said:
He also added that the recent pandemic would add to the factors that’ll boost stablecoin use even after the eradication of the outbreak.
“A broader macro theme that will like emerge post-pandemic is the need for businesses to rely more fully on trust-minimized, decentralized infrastructure.”
On the other hand, Crypto exchange Binance just issued $7 million worth of its stablecoin Binance USD (BUSD). CEO of the company Changpeng Zhao recently reported that BUSD reached a market capitalization of $132 million and is close to becoming the fourth largest stablecoin in the market.