The stable currency of the US dollar has increased by more than 20 times, and the crypto bull market will continue under the flood of liquidity?
In May 2021, USDT printed 11 billion banknotes, while in May 2020 the figure was only 2.5 billion, a year-on-year increase of 440%; USDC printed 8.3 billion new banknotes in May, compared to 13 million in May 2020 pieces, a year-on-year increase of 63,800%.
Clearly, USD stablecoin issuance has entered exponential growth.
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1. The development of USD stablecoins has officially entered the era of "exponential growth"
The issuance of US dollar stablecoins has entered "exponential growth", let's look at two sets of analysis data.
According to the latest data from Coingecko, on May 3, 2020, the issuance of the US dollar stablecoin USDT was about 6.41 billion U.S. dollars. Annual growth of 1120%.
The growth rate of the US dollar stablecoin USDC is also amazing.
On May 3, 2020, the circulation of USDC was about 700 million US dollars. On June 2, 2021, the circulation of USDC had exploded to an astonishing 22.75 billion US dollars, an increase of 2250% in one year.
From this point of view, the development of stablecoins has indeed entered the "exponential" era, and the growth rate of USDC is also far faster than that of USDT.
The actual situation is that the growth rate of USDC is almost far faster than that of all stablecoins except Dai, including USDT, UST, TUSD, PAX, etc.
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2. The drivers of the “exponential growth” of USD stablecoins
There are various reasons for the outbreak of US dollar stablecoins, which can be summed up in three points: 1) the entry of higher-level regular troops, and the moment of "turning the table" is approaching; 2) the promotion of the democratization of cryptocurrencies; 3) decentralization The promotion of financial innovation.
Let's first look at the entry of the regular army, and accelerate the arrival of the moment of "turning the table".
The so-called flipping the table refers to the USDC as the representative, the US dollar credit stable currency issued by formal institutions, and the market value exceeds USDT. The circulation of USDT is 61.77 billion US dollars, and the circulation of USDC is 22.75 billion US dollars.
At present, USDT still occupies the largest share in the global stablecoin market, but the US dollar stablecoin USDC jointly established by Circle and Coinbase is regarded as a substitute for USDT.
At the end of May, Circle, the USDC issuer, announced that it had completed a round of large-scale financing, raising US$440 million. Investment institutions include Fidelity, Digital Currency Group, cryptocurrency derivatives exchange FTX, Breyer Capital, Valor Capital, etc. .
Among them, no matter Fidelity or Digital Currency Group, there are traditional financial forces behind them. The entry of high-level financial institutions has also accelerated the process of USDC, the second stablecoin, "turning the table", and at the same time accelerated the market value of stablecoins process of expansion.
JPMorgan Chase's evaluation of USDT may also intensify this process.
On May 18, Josh Younger of JPMorgan Chase released a new report on stablecoins and their interaction with the commercial paper market, arguing that Tether has and will continue to face difficulties entering the domestic banking system.
The report believes that there are three specific reasons. First, their assets may be overseas, not necessarily in the Bahamas. Second, recent OCC guidance authorizes domestic banks under its supervision to accept deposits from stablecoin issuers (among other requirements) only if those tokens are fully reserved, Tether has acknowledged in a recent settlement with the NYAG office Misrepresentation and violation of regulations. Finally, these acknowledgments, along with other concerns, could raise reputational risk concerns for the country's largest banks, given their ability to house a sizable portion of these reserve assets.
Higher-level institutions are joining the discourse on the dollar stablecoin.
Secondly, the democratization of cryptocurrencies is also a prerequisite for the excessive issuance of stablecoins.
According to a report released by Gemini on April 21 this year, 14% of Americans are currently crypto investors. That means 21.2 million U.S. adults own cryptocurrencies, and other studies estimate the number to be even higher.
Meanwhile, U.K. payments app STICPAY reported spending by crypto users, with crypto deposits up 48% in the first quarter of the year, while fiat deposits remained flat. The report shows that compared to the same period last year, the number of STICPAY users who converted fiat currency to cryptocurrency increased by 185%, while the number of users who converted cryptocurrency back to fiat currency decreased by 12%.
The encryption market is developing at an alarming rate, which directly promotes the prosperity and development of the stablecoin market.
In fact, although the recent crypto bull market has weakened, the issuance of stablecoins has not stopped. On the contrary, the issuance of USDT and USDC has entered a stage of rapid growth. Taking USDC as an example, on May 22, four days after 519, USDC alone issued 5 billion additional tokens.
Finally, it is the impetus of decentralized financial innovation.
In March 2020, Makerdao decided to add the stablecoin USDC as DeFi collateral. At present, about 38% of DAI has been issued by USDC as collateral. According to the current market value of DAI of 4.65 billion US dollars, the amount of USDC pledged in Makerdao alone is as high as 1.8 billion USD, accounting for 7.9% of the total USDC circulation.
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3. The financial market is booming, based on the proliferation of legal currency, and the encryption market is no exception
When we ask "how the flood of dollar stablecoins will affect the encryption market", we might as well ask "how the flood of dollars has affected the US stock market".
What drove the decade-long bull market in U.S. stocks? The answer is obvious: ample dollar liquidity.
Since 2008, the Federal Reserve has implemented 4 rounds of QE, that is, quantitative easing, which has input ten trillion yuan of money into the capital market. Great bull market.
The booming financial market is based on the proliferation of fiat currencies, and the encryption market must follow such laws. However, in the ebb and flow of the financial market reshuffle, the encryption market may also be hit hard, but behind the ups and downs of the K-line, what remains unchanged is that the BTC price is following the S2F trajectory.
Therefore, even if the encrypted market has experienced the violent washing of 519, this will not change Bitcoin's powerful self-healing ability, which is a kind of "robustness" that makes any financial asset in the world ashamed.
