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“DeFi Is Not The Only Success”: Stablecoins Show Explosive Increase In 2020 - Binaryx
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“DeFi Is Not The Only Success”: Stablecoins Show Explosive Increase In 2020

Stablecoins skyrocketed in the third quarter of 2020, and may well compete with DeFi in record numbers. What is fueling the interest of market participants in stablecoins, and will this trend continue in 2021?

Stablecoins renewed highs

In 2020, the DeFi market has rapidly drawn the attention of crypto enthusiasts to itself, filling the information space with news of its unprecedented growth. While most of the crypto community were caught up in the hype around DeFi, stablecoins soared quietly in key market metrics.

Since January 2020, the total supply of stablecoins has grown from $5.7 billion to $22 billion. The third quarter was especially successful: at the end of October, the supply of stablecoins increased by 120%. Tether [USDT] continues to dominate stablecoins with a market capitalization of more than $15 billion. Tether’s capitalization is almost 6 times that of its closest competitor USDC, and, according to analysts, will continue to grow.

What’s the secret behind the rise of stablecoins?

The growth of stablecoins is a natural response to the new challenges facing the global financial market in 2020. Crypto-entrepreneur Joel John is convinced of this. He published a study in which the idea of ​​the current transformation of the digital currency market from speculative to defensive is running through the “red thread”.

We saw the first signs of this trend in March, when, due to the collapse, market participants nervously rushed to look for ways to hedge their portfolios. Stablecoins became the solution that allowed market participants to protect themselves from cryptocurrency volatility.

Joel John also does not deny that the increased interest in the crypto derivatives market has become a strong factor for the growth of stablecoins. According to the latest data, users generate about 8 million stablecoin transactions monthly. Only during September 2020, the volume of stablecoin transactions exceeded the figures for the entire first quarter of 2020. Tether also continues to dominate the Ethereum ecosystem, accounting for 80% of transactions, up from 2019.

According to Joel John, in 2021, we will also witness an increase in demand for stablecoins, but if the DeFi market continues to scale. In the coming year, Tether will try to find an alternative solution to bypass the costly fees on the Ethereum network.