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Stablecoins Thriving Amid Financial Uncertainty

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As a new COVID-19 stimulus bill is debated in the United States Senate and Bitcoin (BTC) begins to bounce back from its volatility lows, the demand for stablecoins continues to grow.

Powered both by the stability that they provide to tokenholders and the demand created by decentralized finance lending and yield farming, stablecoinsTether (USDT) in particular — continue to hit record figures consistently.

According to a report by cryptocurrency data and research firm Messari, USDT may soon become the cryptocurrency with the greatest daily transaction volume in terms of U.

He told Cointelegraph: “USDT certainly could flip Bitcoin in transaction volume in August, and if not then sometime soon after.

Stablecoins as a whole have already flipped Bitcoin in transaction volume.


While USDT and a few other dollar-pegged tokens such as Binance USD (BUSD) or USD Coin (USDC) have been leading the way in the growth of stablecoins, even commodity-based stablecoins have been gaining traction lately.

Tether’s new gold-backed stablecoin, Tether Gold (XAUT), is reportedly seeing high demand as its underlying commodity recently broke above the $1,900 mark — a number that gold has not seen since September 2011 — even coming close to reaching $2,000 for the first time.

Stablecoin issuance and volumes riseAlthough stablecoin volumes have, like most of the cryptocurrency market, remained stagnant during most of the summer, the last few days have seen a considerable uptick in volume for USDT and other dollar-based stablecoins, especially Binance’s BUSD.

Although stablecoin volume has picked up recently, it is still far from the all-time highs achieved in March.

However, the collective market capitalization for all fiat-based stablecoins has been growing consistently, increasing by $3.

Following USDT, Circle’s USD Coin is the second-largest stablecoin, having been the first Tether competitor to surpass the $1 billion market cap figure in early July.


dollar may have been the biggest driver for the success of stablecoins in the first half of 2020, according to Ido Sadeh Man, founder of Saga Monetary Technologies, who told Cointelegraph: “The allure of stablecoins is simple: they appear to promise stability — and given the economic tumult of 2020 so far, it is understandable why they are gaining so much attention.

As Bitcoin surged over the $11,000 mark throughout July 26 and 27, exchange inflows for USDT reached a 2020 high, which suggests buying pressure for BTC and other cryptocurrencies.

In fact, activity for all three of the largest stablecoins — USDT, Dai and USDC — grew tremendously during this time.

On the other hand, the huge growth in activity and value settled in stablecoins does not come from user remittances or transfers but rather interexchange settlements, as noted by Watkins.

He told Cointelegraph: “The majority of stablecoin activity is driven by interexchange settlement.

For example, dollar-pegged stablecoins have lost over 28% of their value alongside the dollar itself as the U.

Those seeking stability need to interrogate the mechanisms which stabilise their chosen coin — otherwise they could be risking asset value if the currency their stablecoin holding is tethered to unexpectedly fluctuates.

Even large swings in the price of Ether (ETH) can have a devastating effect on the peg of a DeFi-based stablecoin such as MakerDAO’s Dai.