Stablecoins Can Hedge The Risks Of Uncertain Volatile Crypto Market

Tarulika  |  Mar 16, 2020

Stablecoins experienced the massive trading volume amid the market bloodshed due to coronavirus outbreak. Tether outstands among the stablecoins with the liquidity of $4.6 Billion while others like USDC, TUSD and PAX have also benefited during the crash in bitcoin market.

Investment In Stablcoins = Flight To Safety

Most of the crypto-traders utilize the stablecoins to hedge the risks during the uncertain or sudden changes in the market prices of cryptocurrencies. Stablecoins are digital assets having a stable value with extremely low volatility, backed by the fiat currency or physical commodity.

In the current volatile situation, when the crypto markets are experiencing the pacing down prices of bitcoin, the fiat-backed coins are gaining popularity. Tether (USDT) which is the most stablecoin with the largest market capitalization is usually the top trading pair along with Bitcoins and had 60-75% of Bitcoin trade volume (more than 5000 coins).

Other stablecoins have also seen the growth from fall of crypto price. Coins like USDC and PAX are two of the top five trading pairs with bitcoins. USDC captured 4.1% of bitcoin trades and PAX around 3%.In the usual scenario, the trading volume of stablecoins is so low that it cannot be compared to the volume of Bitcoins. On the contrary, Jeremy Allaire, co-founder of Circle, explained that last week, the demand of USDC surged, levelling up to $568 million. He termed the surge in demand as “flight to safety” within macro crypto markets.

1/ #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.

Stablecoins Can “Tether Off” Current Volatile Crypto Markets

The official Twitter handle of Paxo has also tweeted about the increased demand for stablecoins. The handle clarified that combined market capitalization of various coins stands more than $395 million around March 12, 2020. Besides USDC, the stablecoin TUSD has also observed the rise in value, which raised to approximately $132 million.

Liquidity in the market fluctuates the prices of all existed stablecoins after March 12, which had to be remain valued at one US Dollar. Crypto investors have found the solutions to hedge their funds by taking advantage of stablecoin arbitrage which helps the users to gain higher profits via different markets.

Thus, it is being noticed that the traders will remain to invest in stablecoins and “Tether Off” to equivocate the current situation of bitcoin markets. 

You May Also Read.

    Related News