Stablecoins Surge Amid Economic Crisis

by Marvin Dumont

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Demand for stablecoins has increased during the coronavirus pandemic. Since mid-March, the outstanding value of the top six dollar-backed stablecoins has risen by 25% to nearly $8 billion, according to CoinDesk data.

Many traditional investors have exited the risky financial markets and holding cash until the global economy stabilizes. Similarly, traders are increasing their investment in stablecoins, which means top cryptocurrencies could see a surge in prices once confidence in the financial markets is restored. The key question now is when the economic crisis will pass.

Greg Cipolaro of Digital Asset Research tells CoinDesk:

… individuals in some countries, possibly including China, might be trying to move money out of their domestic currencies. And it might be easier to exchange their local currencies for stablecoins than to get their hands on actual dollars.

Cryptos’ total market cap is $205 billion (as of this writing) after rebounding late this week.

Strong demand for dollar-backed tokens shows that investors want to access the digital monetary ecosystem in light of the Federal Reserve’s massive new quantitative easing (QE). Some economists predict that this time around, the Fed will print/create $8-$10 trillion dollars in order to stimulate the U.S. economy and prevent high unemployment.

However, this new round of QE will also place devaluation pressure on the dollar. And therefore, buying stablecoins gives traders the ability to purchase cryptocurrencies when market conditions turn favorable. The limited supply of popular cryptos is becoming an advantage at a time when the global economy is flooded with cheap dollars.

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