Increase in Stable Coin holdings these in recent months
Since the past few months, there has been an increase in demand and market capitalisation of stable coins - Tether (USDT), USDC, TrueUSD(TUSD) and Paxos Standard (PAX). These dollar pegged digital assets are designed mainly to hedge against the volatility of crypto assets. Stable coins enable crypto investors to onboard and offboard from the volatile crypto assets easily. However, these days, investors are getting into stable coins for more reasons than just for buying and selling cryptos at the optune movement.
Reference Article - https://cryptonews.com/exclusives/zero-interest-rates-not-the-only-driver-for-stablecoin-deman-6274.htm
A leg into crypto while also having hands on the World Dominant US Dollar!!
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During the Black Thursday sell off of March, many smart investors just sold off cryptos for Stable coins and held it, either to buy back cryptos at a fallen price or stay invested in stable coins as US Dollars was the currency everyone wanted to hold mostly, and stable coins is considered digital Dollars.
Reference article - https://cointelegraph.com/news/stablecoins-gain-market-share-amid-crypto-bloodbath
Earning interest holding US dollars in the form of Stable Coins
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Since, the fiat version of US Dollars held in US banks were giving depositors low almost zero interest rates, stable coins proved to be a better alternate way to hold dollars. Stable Coins earn depositors interest in various platforms like lending platforms Celsius, Blockfi besides other Centralised and DEFI platforms. So, for anyone wanting to hold dollars, obviously stable coin holdings in interest giving lending platforms would have benefited them more than holding up US Dollar currencies in banks.
Quick Global remittances possible with Stable Coin transfers
Another advantage of Stable coins is that it could be transferred globally around the world easily, so it’s an alternate way of sending US dollars overseas. The digital asset can be used for international remittances and demand for stable coins has also poured from institutional investors in the past few months.
The need for US to have Digital Dollars make stable coins important
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Lately, the US Government got interested in stable coins because they are the nearest version of digital dollars available currently. The US is necessitated to have a digital version of the US Dollar ever since China has succeeded in building a blockchain based digital Yen. Although the current stable coins are not blockchain created dollars like China’s Digital Yen, they being just digital assets pegged to the US Dollars, they are the nearest version of Digital Dollars the US ever has now. It’s obvious that stable coins therefore, have immense significance now for the US.
Correlation of Stable Coins to whatever would affect the US Dollars
The US pegged dollar stable coins can’t function as a hedge against inflation of the US dollars obviously as the underlying asset of these stable coins is the US dollar, but they would always have inflows because they are easy onboarders for people to buy crypto assets like BTC, which is talked about as a asset than can act as a hedge against US Dollar inflation.
Stable Coins will always play a important role in expanding the crypto ecosystem
There is a possibility that US dollars could get devalued, when US banks start charging negative interest rates to depositors. At that time, stable coin holders may just buy BTC with the stable coins their hold, to hedge against US Dollars.
Stable coins, let’s remember, are valuable mainly because they let people foray into the crypto ecosystem, so it has a big role to play in expanding the crypto ecosystem in the future, whatever the future of the US Dollar.