Stablecoins Leading Financial Giants Into The Crypto Space

August 10, 2020

While digital assets have been in a constant state of flux since 2018, stablecoins have been on a steady rise. As their name suggests, the value of stablecoins is less volatile than other cryptocurrencies as they are bound to a fiat currency. Tether (USDT), for example, is tethered to the U.S. dollar and QCAD is linked to the Canadian dollar (1QCAD: 1CAD).

In the wake of the recent COVID-19 crisis, many of these stablecoins have weathered the storm. After Black Thursday in March, Tether’s daily transaction volume doubled from $50 billion to nearly $100 billion. This led to currency issuers making billions of additional USDT available with a total market cap exceeding $10 billion.

It’s no surprise that stability is a concern for many crypto investors after such a tumultuous year. After huge value growth in 2017 followed by the cold shower of early 2018, the market was regularly dropping and soaring until the start of 2020. Things seemed to be growing steadily until the pandemic hit and the market crash brought everything back down with a thud. Since April, however, things have climbed back to roughly where they were in February.

 

What Are Stablecoins Used For?

Cryptocurrencies may have caught the attention of many new investors, but they’re unlikely to dive headfirst into the more volatile coins just yet, particularly during a pandemic. The middle ground between “safe” traditional assets and crypto are stablecoins. Currently, stablecoins are primarily used by crypto traders to buy other cryptocurrencies without being stung by fees for each transaction (as they might be when buying crypto with dollars and cashing out). In other words, stablecoins acts as an intermediary step into cryptocurrencies.

The continued increase in stablecoin purchases signifies a slow but ongoing move towards mainstream adoption of cryptocurrencies as a replacement for traditional money. While many purchase stablecoins, and the crypto market continues to become more stable, digital assets on the whole become more viable and attractive to everyone.

 

Financial Giants Entering the Crypto Space

This shift in the perception of cryptocurrencies as a mainstream asset becomes clearer as major players enter the space. Mastercard has partnered with London-based Wirex to offer customers automated conversion of cryptocurrencies into fiat. Using their card, cryptocurrencies can be used to pay for goods and services. Paypal is also getting involved, with an announcement expected any day of their partnership with the Paxos Trust Company to integrate crypto buying and selling into their services for millions of clients.

JPMorgan has changed their tune on digital assets, as they are now offering cryptocurrency trading after years of vocal opposition to the market. Visa has also linked their services to 25 digital currency wallets to give users a platform to spend their digital assets. The company specifically noted stablecoins as a factor in their move towards digital currency transactions.

The steady growth of stablecoins in the market along with massive players in finance offering digital currency services is a sure sign of mass adoption becoming a probability in the future. This incremental legitimization of cryptocurrencies is leading both investors and businesses to see it’s better to be on the train than left behind.

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