Present uncertainty in global stock and commodity prices is being reflected in the cryptocurrency markets. Swinging prices and a growing amount of capital parked in stablecoins are telling signs of investor indecision.
The combined market capitalization of all stablecoins has now reached an all-time high of more than $7 billion. The growth of the market capitalization suggests that many traders might have exited positions in Bitcoin
Stablecoin Market Shows Consistent Growth During Economic Meltdown
The last few weeks have been a roller coaster no matter what you trade. Global stocks, commodities, gold, and even Bitcoin have flipped from pumping to dumping and back again as the economic impact of the coronavirus pandemic starts to reveal itself.
One market that has been seeing steady growth amidst the chaos is that of stablecoins. Stablecoins, like USDT, USDC, and TUSD, are digital currencies that are designed to hold a steady value. A relatively modern innovation in terms of the cryptocurrency industry, they quickly found use as a tool for traders to exit positions in often-volatile assets like Bitcoin and other cryptocurrencies to relative stability.
The market capitalization of all stablecoins has been steadily growing over their existence. In late 2017, the market was worth just $1 billion. By mid 2018, it had grown to more than $3 billion. As BeInCrypto reported, at the end of January this year there was around $6 billion sitting on the cryptocurrency sidelines.
More than $7 Billion Ready to Reenter Cryptocurrency Market
Since then, the amount of money moving into stablecoins has increased dramatically. As panic over the spread of the coronavirus took hold of global markets in recent weeks, more traders have been exiting cryptocurrency positions in favor of stablecoins.
As cryptocurrency analysis firm Bloqport (@Bloqport) points out in the tweet below, the dollar value of the stablecoinStablecoins are a class of cryptocurrency that aim to provide price stability. One of the perceived drawbacks of cryptocurrency is... More market increased by a massive $1.5 billion in the last month alone. Bloqport reasons that a sudden move of this capital back into the likes of Bitcoin could inspire further upside.
DATA: There is over $7 billion in stable coins sat on exchanges, up $1.5 billion in the last month.
A lot of money on the sidelines waiting for the right moment to jump back into crypto markets and for #Bitcoin to bottom. There could be strong bullish pressure ahead. ?? pic.twitter.com/11QcC5ias6
— Bloqport (@Bloqport) March 27, 2020
What it will take to coax those taking refuge in stablecoins back into the market remains to be seen though. The recent drops in Bitcoin and other cryptocurrency markets were among the most violent in the asset’s history. For now, the market remains in a state of “extreme fear.” However, the decision of these traders to park value in USDT and other stablecoins in favor of fiat is likely telling of their future intentions.
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Images courtesy of Shutterstock, Trading View and Twitter.
