DeFi and transactions have driven the number of those tokens higher, and more than USD 150,000 already support them. A leading entrepreneur in that sector predicts that there will be mass adoption of stablecoins for payments in 2022.
An increasing capital volume enters the cryptocurrency market for decentralized finance (DeFi), trade on exchanges, and derivatives trading. The record creation of stablecoins occurring over the past year has allowed inferring that.
The tokens having a price tied to the value of another asset like the US dollar, increased by 388% in the last year. From a total of USD 29,000 million, now more than USD 150,000 million back those crypto assets.
The best-known stablecoins are Tether (USDT), USD Coin (USDC), DAI (DAI), USDP (USDP), and Binance USD (BUSD). Even though the latter dominated that field over the years, that trend began to drop in 2021.
USDT started the year with slightly over USD 21 billion dollar-backed units and ended it with more than USD 81 billion. In other words, the volume of that stablecoin almost grew fourfold.
However, the growth in the volume of USD Coin was much higher. More than USD 4,000 million worth of that stablecoin were locked in January 2021, while the amount already exceeded USD 41,000 million in December. In other words, it grew ten times compared to the 12 previous months.
Likewise, BUSD, the stablecoin issued by cryptocurrency exchange Binance, exponentially increases from 1 billion to more than 14 billion units throughout the year.
Despite that, USDT continues to be the king of stablecoins regardless of recent complaints. Tether Holdings Limited, the issuer USDT, allegedly does not support investor assets as claimed. At the same time, the US Congress analyzes the possibility of regulating those cryptocurrencies.
Investors Want to Find a Place Where to Put their Capital
During the analysis of cryptocurrency markets, the exponential growth of stablecoin issuance can be a crucial factor. Their nature and the role they play in the ecosystem create that situation.
The primary use of stablecoins is that of reducing volatility when making transactions. In that way, they become helpful instruments on centralized and decentralized exchanges and in decentralized finance protocols.
The growing amount of funds for issuing those cryptocurrencies indicates a significant flow of capital into the crypto world. Although many have not yet settled on any of the above options, they are ready to jump into the field when investors deem appropriate.
Likewise, derivatives markets are also contributing to increasing demand for those tokens. Many futures contracts set the price of crypto assets in stablecoins to avoid discrepancies. That is because there are significant variations in the value of other cryptocurrencies like Bitcoin (BTC) and Ether (ETH).
The CEO of Circle, Jeremy Allaire, highlights that the massive adoption of stablecoins to accept payments can enhance that growth in 2022. That firm is one of the developers of USDC, the second stablecoin with the highest capitalization worldwide. For that reason, his opinion carries a lot of weight to predict what next year will bring to the sector.
By Alexander Salazar
