While Tether (USDT) is currently the most popular stablecoin by far when information technology comes to trading volume and market capitalization, the latest Commutation Review from CryptoCompare shows that other stablecoin projects such as USD Coin (USDC), Paxos Standard (PAX) and TrueUSD (TUSD) have gained modest basis in the final few months, reducing USDT'south market share in monthly Bitcoin (BTC) volume traded into stablecoins from approximately 98% in July 2022 to 92% in March.

The price of Bitcoin is currently sitting at $7,002, having largely recovered from the "Black Thursday" crash of March 12. Although some traders point to a possible pullback, USDT's growing supply may signal more buy pressure, a somewhat bullish sign for Bitcoin, although investors may likewise be looking to go exposure to the USD through crypto.

Crypto market data. Source: Coin360

Crypto market data. Source: Coin360

USDC and PAX are stablecoins issued past Circle and Paxos, respectively, and both are pegged to the United states dollar. All 3 stablecoins leverage the Ethereum blockchain, but both USDC and PAX are far younger than USDT.

Nevertheless, both stablecoins have go increasingly popular in recent months, with USDC representing approximately 5% of BTC volume into stablecoins and PAX with 2.5%.

Monthly Bitcoin volume traded into stablecoin. Source: CryptoCompare

Monthly Bitcoin book traded into stablecoin. Source: CryptoCompare

USDT however dominates stablecoins and fiat

While USDC and PAX accept gained some market share over the terminal few months, particularly in February, the BTC–USDT pair still represents the majority of BTC traded into stablecoins with an overwhelming 92% of the volume, approximately.

Not only is USDT the almost pop pair for Bitcoin among stablecoins, just information technology's also the most pop pair beyond the board. Although the U.S. dollar pair saw a spike of effectually 170% in March due to the COVID-19 outbreak, USDT saw a much more accentuated spike, tripling in volume.

USDT saw over 21 million BTC in volume during March and at present represents 73% of total BTC traded into fiat or stablecoin.

Monthly Bitcoin volume traded into fiat or stablecoin. Source: CryptoCompare

Monthly Bitcoin volume traded into fiat or stablecoin. Source: CryptoCompare

Other stablecoins are besides commencement to surpass major fiat pairs, with both USDC and PAX overtaking the pairs of BTC–euro and BTC–South Korean won in terms of total volume.

Demand for stablecoins grows

Stablecoins play an important part in the cryptocurrency world. Traders tin can get exposure to the toll of fiat currencies and precious metals without leaving the cryptocurrency earth, which allows for fast, inexpensive and censorless payments. Nigh importantly, users can actually "own" their assets, which are not prone to the risks of leaving funds with a third-party exchange.

Demand for stablecoins tin can be observed in the USDT supply, which has grown by $2 billion since March 12, the largest inflow in USDT'southward history. Co-ordinate to Glassnode, the USDT balance on echanges has too reached an all-time-high of 1,661,769,830.684 USDT. A 2022 report found that large purchases with Tether were "timed following market downturns" and resulted in increases in the Bitcoin Cost.

USDC also saw its biggest monthly inflow by four times. Increased demand for stablecoins can mean buying pressure level for Bitcoin but as well need for alternative ways to store and transfer fiat currencies and to motility into other stablecoin assets.

Moreover, exchanges like Binance also offer double-digit interest rates on stablecoins, which makes them even more bonny as a shop of value and alternative to fiat. Recently, the Group of 20'south Financial Stability Board issued a written report on stablecoins, citing this very factor as the main concern. The written report reads:

"During periods of stress, households in some countries might come to regard GSCs [stablecoins] as a condom shop of value over existing fiat currencies and exacerbate destabilizing capital letter flows. Volatile capital flows tin can take a destabilizing effect on commutation rates and on domestic depository financial institution funding and intermediation."

The G20'due south FSB has also expressed some concern for decentralized stablecoin protocols like MakerDAO'due south Dai. But despite seeing an all-time high in terms of active unique wallets during March, decentralized finance stablecoins are still also modest to pose a serious threat.

Stablecoins' office in the COVID-19 pandemic

The importance of stablecoins became evident during the March 12 crash when liquidity was central. Bitfinex, which is the almost liquid commutation in terms of club book depth, saw the most volume at the exact moment the crash started. This outweighed the volume recorded at Binance and Okex. During the crash, Bitfinex handled volumes in the magnitude of $xi.eight million worth of trades per minute.

However, stablecoins may as well have a office to play in the larger scheme of things, peculiarly during the electric current coronavirus pandemic. For instance, stablecoin projects like Celo and Saga aim to bring additional stability by providing an asset pegged to an underlying basket of fiat currencies. This technique tin can help individuals further hedge their bets, as they are not exposed to a unmarried country's currency, which tin can be a very attractive proposition in the current climate. Keren Orian Nadel, Saga's managing director, told Cointelegraph:

"The SGA model starts by being fully reliant on the value of a trusted basket of currencies — replicating the configuration of the IMF's SDR (Special Drawing Rights), which has been successfully trialed for over five decades now. But unlike all other stablecoins, SGA aims to eventually carve up from the SDR and get an contained currency with its own value. We believe this answers a vital demand: for the global economy to be served by a global currency tailored to its needs — and independent of whatever single nation's financial and monetary calendar."

Meanwhile, some take even suggested using stablecoins as a readily available alternative to the digital dollar for COVID-19 U.S. dollar stimulus payments. Stablecoins and cryptocurrencies alike are already providing advantages, such as the ones previously listed, for those who want to hedge against the electric current economic downturn.