Stablecoins Account for 80% of Ethereum Value Transfers – Is Crypto Led by USD?


Ethereum

Stablecoins Account for 80% of Ethereum Value Transfers – Is Crypto Led by USD?

  • Stablecoins are dominating the transfer of value on Ethereum, which is now reaching parity with Bitcoin.
  • While USDT (Tether) leads the stablecoins space, the stablecoins issued on the DeFi ecosystems could blowout due to legal crackdown.

Ever since panic in global began due to the pandemic spread of coronavirus, the global demand for the US Dollar has been sky-rocketing.

As previously reported on CoinGape, the supply of stablecoins has witnessed a strong rise since March this year. According to the report by Watkins, it has ‘ballooned over $8 billion’ in the first quarter of 2020. Ryan Watkins, Research analyst at Messari notes,

Stablecoins now account for 80% of daily transfer value on Ethereum, and they’re used for significantly larger transfers on average than Bitcoin.

Stablecoins simply have a better product-market fit for transferring value between exchanges, one of today’s dominant use cases.

Moreover, the value transfers on Ethereum is currently reaching parity with Bitcoin over $1.5 billion (30-day average). Hence, it’s dominance on the crypto markets is now significant enough to cause massively affect the crypto markets.

eth btcBitcoin Vs. Ethereum Value Transfers

The total market capitalization of USDT is looking to compete for a top-three position competing against XRP and Ethereum itself. Ethereum as a decentralized issuance platform is bridging the cross-border for holding US Dollar.

However, a certain class of DeFi based stablecoins on Ethereum faces uncertainty and a regulatory crackdown.

Stablecoin Blowout

Derivatives and crypto trader, Tone Vays noted in his recent Trading Bitcoin update,

“I think sometime later this year there might be a crackdown on stablecoins which will IMO send Bitcoin dominance through the roof.”

Nevertheless, while Vays did not cite the source of the crackdown, a recent lawsuit against MakerDAO threatens a regulatory crackdown.

dai usd stablecoin
Lawsuit Against MakerDAO and Dai (Source: Tweet)

The lawsuit filed by a Maker investor alleges that the that “it has in fact promoted a system that it maintains primary control over while actively misrepresenting to investors” the risks of investing in that system. Preston Byrne, partner at Anderson Kill Law noted,

The legal implications of that allegation, if proven true, for the Dai stablecoin scheme would be very sub-optimal.

If true it also would discredit Dai as an example of a working decentralized alternative to USD.

The growing trend around DeFi-based stablecoins might be a worrying signal for the future. There are a couple of other stablecoins like DAI which leverage the DeFi ecosystem on Ethereum and Tron to back the value of their stablecoin. However, there are questions around the stability (1:1 USD peg) when the asset backing it is vulnerable to volatility. Byrne predicts this suit will settle out of court.

How do you think stablecoins will affect the crypto markets? Please share your views with us. 

Author: Nivesh Rustgi
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com
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Nivesh Rustgi 1180 Articles
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com
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