In recent weeks, an increasing coronavirus-induced panic has taken its toll on markets around the world. Out of the carnage that has seen tens of billions drained from the cryptocurrency markets, stablecoins are proving themselves popular with investors looking to protect wealth whilst markets slide.
The dominant stablecoin US Dollar Tether and others enjoyed market capitalization gains as cryptocurrency investors rushed for an exit to fiat amid mass market turmoil. USDC, the US dollar-backed initiative by both Circle and Coinbase, is among the stablecoins currently growing in demand.
The CEO of the project, Jeremy Allaire, says that although the slide in cryptocurrency markets is “not as exciting,” he is encouraged to see “demand for internet dollars” increasing.
Allaire: Coronavirus Pandemic Proves Blockchain Money Is Working
In the last few days of a market selloff, there have been few winners. At its worst point, Bitcoin alone had shed more than $60 billion from its market capitalization in just a matter of hours. In terms of percentage losses, other digital currencies fared even worse.
However, stablecoin projects with their pegs to less volatile currencies – like the US dollar – have seen renewed investor interest during the recent market turmoil. The largest stablecoin, USDT, saw its own market capitalization rise to more than $5 billion.
Similarly, the Circle and Coinbase project USDC also experienced market cap gains. In the Twitter thread below, Circle CEO Jeremy Allaire says such increases in demand are encouraging for the industry:
1/ #USDC surging in market demand over the past days, reaching new ATH at $568m in circulation. Fascinating to see "flight to safety" within the crypto macro market, but also demand for high quality USD liquidity for markets.— Jeremy Allaire (@jerallaire) March 13, 2020
Will Demand Remain When Things Calm Down?
It seems obvious that demand for stablecoins should increase as a huge percentage of cryptocurrency investors are panicking. However, the question is, will the dollar-pegged digital currencies remain attractive when things eventually start to stabilize?
Allaire thinks they will. As part of the thread below, he writes:
“A broader macro theme that will like emerge post-pandemic is the need for businesses to rely more fully on trust-minimized, decentralized infrastructure.”
Physical cash itself has already been deemed suspect in some parts of the world in the wake of the coronavirus’ spread. If viable and more functional alternatives are available in the form of stablecoins, why would a company even open itself up to the small but unnecessary risk of handling cash going forward? Allaire thinks they won’t.