In a year filled with uncertainty in the cryptocurrency space, a new trend has been unraveling: a stablecoin exodus that has now lasted for 18 consecu
exchange-traded fund as factors contributing to the increase in stablecoin trading volumes.
Meanwhile, stablecoins are perceived as riskier because the crypto market is still largely unregulated. Additionally, stablecoin returns aren’t fully guaranteed. This means if interest rates are comparable between both options, investors are more likely to choose T-bills over stablecoins. At the same time, USDC’s ubiquity in the DeFi space has long nudged other stablecoins like Dai to the periphery due to its over-collateralization requirements.
Peli Wang, co-founder and chief operations officer of Bracket Labs — a decentralized finance options exchange — noted that leading stablecoins USDT and USDC registered a 23% drop in their market capitalization from June 2022 to September 2023, compared with the 66% drop from $3 trillion to around $1 trillion the cryptocurrency space suffered from November 2021 to September 2023.
To CEX.IO’s Sarwate, there’s “no question” that higher interest rates made traditional finance more attractive to investors seeking fixed income. Stablecoin adoption, she added, was initially a “convenient on-ramp for crypto-curious participants to access more advanced services in the digital economy.”2023 saw major stablecoins USDC and USDT depeg at some point, which wobbled investor confidence.
If stablecoins offered the same yields as Treasurys while remaining just as compliant, she added, many cryptocurrency users would likely want to hold their assets in stablecoins, which are easier to move and trade. PayPal’s stablecoin could nevertheless help the sector recover, even if by bringing in new users who had never used cryptocurrency before. Speaking to Cointelegraph, Erik Anderson, senior research analyst at ETF firm Global X, suggested PYUSD could be lowering the barrier of entry for crypto:
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