Stable Coins Growth Imminent, Tether May Pass Ethereum for No.2 Spot
Recent analyses suggest that stable coins may be in for an unprecedented usage growth starting from this year.
An Harvard Business Review article hints that the U.S. Federal Reserve’s announcement that it’s investigating the possibility of issuing its own digital coin is likely pushing blockchain-powered digital payment services to be the next big thing in global e-commerce growth.
Though it cites that only three of the four conditions that need to align for this objective to be achieved – appropriate technology, consumer demand, and corporate champions – are in place while the amenable regulatory environment is expected to materialize in the next few years. Then, the adoption of stable coins as a means of payment might boost adoption of blockchain technologies above and beyond the current niche uses, as well as breach the barriers to entry in the e-commerce market.
Whereas, stable coins have been touted to experience a prolonged arc of growth in 2020, taking the reins as crypto’s biggest use case. According to Factom Protocol’s Greg Forst, the necessity for stable coins will increase and 2020 may well deliver the needed growth as more and more institutions realize the benefits of blockchain-based digital money.
He noted that decentralized finance (DeFi) is set to continue on its current upward growth trajectory and stable coins propose benefits in this direction as well. Forst also noted that since stable coins offer a uniquely decentralized payments solution, they are joining the march for a more just, user-focused, payments industry by offering cheaper, faster, and global payments settled decentrally.
All these are in line with data from the June 2020 edition of theBloomberg Galaxy Crypto Indexwhich indicates that the rapidly increasing market capitalization of stable coins shows currencies are going digital and supports the Bitcoin price. The trend, it states, has been hastened by the Covid-19 pandemic which has been shifting transactions away from paper money and stimulating plenty of quantitative easing to favour independent stores-of-value such as gold and Bitcoin.
It added that Bitcoin appreciation and surging interest in crypto assets tracking a stable currency is an enduring trend and a support for the Bitcoin price at over $10 bln in May 2020 as against about $4 bln a year ago according to Grayscale.
“Our graphic depicts the close relationship with assets tracking Tether, which accounts for about 90% of stable coin assets and the price of Bitcoin,” the report by Bloomberg Intelligence says about Tether USDT. “Absent an unlikely reversal in predominant crypto trends, it should be a matter of time until Tether passes Ethereum to take the No. 2 spot in total assets behind Bitcoin. Benefiting from widespread adoption with a viable case as a proxy for the world’s reserve currency, there seems little to stop the increasing adoption of the dollar-linked stable coin. Our graphic depicts advancing Tether assets near $9 billion and looking up to Ethereum (ETH), which has stabilized at about $22 billion.”
With Tether adoption on the rise with the U.S. dollar, the report notes that “the advancing dollar will fuel demand for the Tether stable coin, in our view” and “Tether and stable coins are gaining traction as vehicles for dollar exposure without intermediaries and for transferring value among the numerous highly speculative and volatile crypto assets.”