There is roughly $8 billion sitting in stablecoins, good thing or bad thing?

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Why is all this money sitting in stablecoins?

Looking at the market caps of the largest stablecoins, we can quickly see that there is roughly $8 billion sitting in stablecoins currently:

  • USDT = $6.4 billion
  • USDC = $750 million
  • PAX = $300 million
  • BUSD = $40 million
  • TUSD = $230 million

And these are just a handful of the largest stable coins.

Add all of them up and we are sitting right near $8 billion.

If you aren't familiar, that is a record number of money parked in stablecoins, and it has mostly been growing by the week.

What is going on?

There a couple schools of thought here that I briefly touched on in some recent posts, one of which can be seen here:

https://hive.blog/hive-148441/@jrcornel/the-4th-most-valuable-crypto-project-isn-t-really-a-cryptocurrency

On the one hand, you can look at it in an extremely bullish sense, seeing it as dry powder that is yet to come into the "crypto" market. On the other, you can look at it as a bearish indicator, as people sitting on the sidelines because they are anticipating more pain to come...

I guess there is also a third case as well, which I touched on in the above post, and that is where all this money that is sitting in stablecoins really wants nothing to do with the broader crypto sector.

They just want a way to quickly, cheaply, pseudo-anonymously?, move money or hide out in a place that is free from the risk of cryptocurrencies and many of the other markets out there in the current shaky environment.

In my opinion, it's likely some combination of all three...

I think there is a large group (probably miners and exchanges) that are taking precautions for what could happen with the halving quickly approaching.

Last halving we saw a significant dip immediately following the halving.

It's very possible miners and or exchanges are trying to hold some of their assets in stable coins in order to protect against a similar action playing out again.

That third scenario also seems pretty likely to me, where people who want nothing to do with the broader crypto space are turning to stable coins to move money.

I remember reading about record remittance payments several months back via tether. People earn money in one country and then send it back to their country via tether. No worries about the volatility of something like a bitcoin...

(Source: https://www.tradingview.com/symbols/BTCUSD/)

That being said, the bullish thesis is of course my favorite one...

Keep in mind that if that money moved out in bitcoin, it could buy over 1 million bitcoin at current prices. Can you imagine what that might do to the price of bitcoin?

Continuing down the road, I don't even need to tell you what that kind of buy pressure could to to altcoin prices...

So, the potential is clearly there for a massive move, and with governments saying they are going to try and heavily regulate the stablecoin market, that money might be forced to go somewhere.

Why do you think so much money is sitting in stablecoins currently?

Stay informed my friends.

-Doc



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16 comments
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I wish I knew why! Maybe ready for more paaain would be my guess

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That is probably part of it. I would normally expect a dip post halving, and there still may be one, but given our drop to $3.8k a few weeks back, I don't think there will be as big of a post halving dip as I originally expected.

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Yshthe news of coronavirus was definitely an unexpected dip 🤣

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Why do you think so much money is sitting in stablecoins currently?

Corona Virus?


That being said, the bullish thesis is of course my favorite one...

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Yep, that is probably part of it as well. The risk-off mentality that is out there currently causing some to park money in safer places.

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Yepp, people are waiting to see the aftermath of corona effect.

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Kind of stupid if you ask me... but every one is free

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Because the value of stablecoin is usually tied to some FIAT currency, they are simply used for internal bookkeeping in exchanges and other sites holding large amount of coins. This is because lower risk of value going down.

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Yep, exactly. It will be interesting to see what happens to all that money when/if heavy regulations start coming down on stablecoins...

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We all know what happened to Tether... Same might happen to other stablecoins that fail to keep their promises or deceive the markets.

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What happened to tether? It still seems alive and well...

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It got hacked... Owners lost quite a lot of tokens and they were forced to do emergency rewind of the blockchain. After that it failed several third-party audits.

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Yessir!... plus Stablecoins can be insured and/or collateralized easier than most cryptos. ie I'm earning 8% apr on my stables in my NEXO account 😃which is insured up to $100m by Lloyd's of London.

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That's not a bad deal at all... Nicely done!

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Always wonder what is the use case of stable coins.
It is getting clearer every second one foot in, one foot out

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I think it’s also partly to do with the incredibly high interest rates paid out on stable coins at the moment with many crypto services. I mean 12% on stable coins on crypto.com earn program sounds pretty good to me, or a flexible option of 8.6% with blockfi where you can withdraw and trade your stable coins at any time. With the historically low interest rates at the moment, I think many are turning to the stable coin option to get higher returns.

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