If there is something that every investor with experience knows is that in the face of crises, the most sensible thing is to take shelter in relatively safer assets. This does not exclude the cryptocurrency market, where after the fall of more than 30% of the price of Bitcoin, many chose to take refuge in stablecoins such as Tether.
Although this fact could be debated, the undeniable is that stablecoins benefited from the market crash on Thursday. Hundreds of millions entered USDT as Bitcoin’s price volatility increased.
That is, given the increasing volatility of Bitcoin this week, the demand for stablecoins soared. The clearest example was Tether’s cryptocurrency (USDT), which surpassed a market cap of $ 5 billion.
Another fact that must be highlighted is the more than 500 million dollars minted by this crisis in which USDT emerged as the main stablecoin.
Tether’s transparency page currently indicates that USDT has a market cap of $ 5.12 billion. Based on reports from Whale AlertIt appears that Tether minted more than $ 500 million in the days leading up to March 12.
Tether also minted another $ 115 million USDT in the following days. The above can be corroborated in the latest reports on crypto whales made here at CriptoTendencia.
Contrast of facts
However, it appears that most market aggregators have not taken these changes into account. CoinMarketCap, for example, reports that Tether has a market capitalization of $ 4.6 billion and its charts give no indication that Tether’s global offering or market capitalization has changed over the past week.
Furthermore, both official and unofficial figures exclude Tether currencies backed by yuan, euros and gold, which together represent more than $ 70 million in assets.
The controversy over Tether and its transparency continues
Unlike Bitcoin, Tether can easily be coined as long as USDT has enough guarantee to do so. This means that Tether creates and destroys USDT tokens to adjust its supply, a procedure that in turn maintains parity with the US dollar.
This makes it difficult to say whether Tether’s decision to mint a large number of new tokens is actually based on actual investor demand.
Furthermore, some critics are dissatisfied with Tether’s auditing practices and question whether it really has enough assurances. Others argue that Tether is used in the laundry trade and in market manipulation.
In defense of Tether, its stablecoin offered cryptocurrency investors an escape route from the recent price volatility. The USDT has maintained its fixed price of $ 1.00 for several years and with the fall of this week there was no exception.
Other stablecoins are also thriving despite the market crash
Circle CEO Jeremy Allaire noted that his company’s stablecoin (USDC) is experiencing a surge in demand and that its current offering has grown to $ 568 million. Like Tether, USDC is backed by a core group called CENTER, which has recently burned and minted several USDC tokens.
Meanwhile, Binance CEO Changpeng Zhao reported that his stablecoin (Binance USD) has reached a market capitalization of $ 132 million. This is important to highlight as BUSD was released just in September 2019, and with that capitalization it becomes the fourth largest stablecoin.
By this we do not mean that everything is rosy for stablecoins …
Indeed, not everything is fine between stablecoins. For example, MakerDAO recently took emergency measures to protect Dai from Thursday’s crash. Dai is your ERC-20 backed stablecoin.
Because Dai is backed and governed by individual creditors, coins cannot be unilaterally minted or burned. Descicions are taken by consensus.
It remains to be seen whether the cryptocurrency market will experience a further decline and whether demand for stablecoins will increase again among investors if that occurs.
For now, at the time of writing this article Bitcoin is located at 5,262.66 USD. In other words, it has had a slight recovery but remains at red levels, with a loss of 2.62% compared to yesterday.
This is not to imply that you should despise the assets you have or wish to acquire in Bitcoin or another cryptocurrency that is not a stablecoin. The intention is to report a trend that is happening right now.
Furthermore, it has been seen on other occasions when investors decide to forego their Bitcoin for the sake of their investments at any given time.