Fiat backed stablecoins are having a field day since the price of Bitcoin (BTC) skydived to a low of $3,850 USD in March. According to CoinMarketCap, stablecoins have gained between 20 percent and 85 percent.
Paxos market capitalization has registered a growth of 20 percent; the Coinbase USDC went up by 55 percent while Binance BUSD went up by 85 percent. The growth is in total contrast with the ripple effect that follows when BTC price drops.
The surge saw Hsaka, a crypto trader, tweet:
The Fed isn’t the only institution that’s been printing away. Crypto finds its Jerome Powell in the form of stablecoins, which have been going BRRR since the BTC lows.
However, the unanticipated pike over the last few weeks could be attributed to the microeconomic factor; “a global shortage of USD” adds Coin Metrics, a platform that tracks crypto data.
Fiat backed stablecoins benefit from the global dollar shortfall
The central bank response to the current economic state has seen the digital money market stabilize. With the ongoing implementation of policies and injecting additional liquidity appears to have cushioned the market volatility.
Issuance of fiat backed stablecoins is also on the rise in the last one month, a dramatic change that has slowed down volatility associated with non-stablecoins. With increased retail activity is a good sign for the crypto sphere. Continues uptake of the coins will tame the runaway volatility associated with crypto.
Are fiat backed stablecoins taming the USD?
The USD shortage globally has seen the green buck index head north by 8 percent which can be attributed to the increased selloff. The U.S. dollar is the world reserve currency which plays a huge role in global transactions. However, it still dominates the global debt with the bulk of it being issued by cross border governments and high profile firms.
COVID-19 pandemic has also contributed to the current state of the economy. This has had a negative impact on the supply and demand matrix leading to destabilizing the green buck. The shortage explains why a stablecoin like USDC gained over 50 percent from March 10 to cushion the USD shortfall.