US Dollar Stable Coin Increases Over 20 Times Yearly, Crypto Bull Market to Continue Under Liquidity Flood?

In May 2021, USDT printed 11 billion coins, while in May 2020 the figure was only 2.5 billion coins, a 440% year-on-year increase.

US Dollar Stable Coin Increases Over 20 Times Yearly, Crypto Bull Market to Continue Under Liquidity Flood?

In May 2021, USDT printed 11 billion coins, compared to 2.5 billion in May 2020, a 440% increase year-over-year; USDC printed 8.3 billion new coins in May, compared to 13 million in May 2020, a 63800% increase year-over-year.

Clearly, dollar stablecoin issuance has entered exponential growth.

So what exactly is driving the dramatic expansion of dollar stablecoins? What kind of impact will the rapid expansion of USD stablecoin have on the crypto market?

1、The development of USD stable coin has officially entered the era of “exponential growth
USD stable coin issuance has entered the era of “exponential growth”, let’s look at two sets of analysis data.

According to the latest data from Coingecko, on May 3, 2020, the USD stablecoin USDT issue volume was about USD 6.41 billion, and one year later, on June 2, 2021, the USDT issue volume had exploded to a staggering USD 61.77 billion, a one-year growth of 1120%.

The growth rate of USD stablecoin USDC is equally impressive.

On May 3, 2020, USDC issue volume was about $700 million, and on June 2, 2021, USDC issue volume has exploded to a staggering $22.75 billion, an increase of 2,250% in one year.

Thus, it seems that the stablecoin development has indeed entered the “exponential” era, and the growth rate of USDC is much faster than USDT.

In reality, USDC is growing much faster than almost all stablecoins except Dai, including USDT, UST, TUSD, PAX, etc.

So, what has contributed to this result?

  1. The driving factors for the “exponential growth” of USD stablecoins
    There are various reasons for the explosion of USD stablecoins, but there are only three: 1) the entrance of higher-level regular army and the approach of the “table-setting” moment; 2) the promotion of the civilianization of cryptocurrencies; 3) the promotion of decentralized financial innovation.

First of all, let’s look at the entrance of the regular army, accelerating the “table-setting” moment.

The so-called “lift the table” refers to the USD credit stable coins issued by formal institutions, represented by USDC, whose market value exceeds that of USDT, whose issuance volume is USD 61.77 billion and USD 22.75 billion.

Currently, the global stablecoin market is still dominated by USDT, although USDC, a USD stablecoin founded by Circle and Coinbase, is seen as an alternative to USDT.

At the end of May, USDC issuer Circle announced that it had completed a massive round of funding, raising $440 million, with investors including Fidelity, Digital Currency Group, cryptocurrency derivatives exchange FTX, Breyer Capital, Valor Capital and others.

The entry of high-level financial institutions has also accelerated the process of “lifting the table” for USDC, the second oldest stablecoin, and also accelerated the expansion process of stablecoin market capitalization.

JP Morgan’s comments on USDT may also exacerbate this process.

On May 18, JPMorgan’s Josh Younger released a new report on stablecoins and their interaction with the commercial paper market, arguing that Tether has faced and will continue to face difficulties in accessing the domestic banking system.

The report argues that there are three specific reasons for this composition. First, their assets may be overseas, not necessarily in the Bahamas. Second, the OCC’s recent guidance authorizes domestic banks under its supervision to accept deposits (and other requirements) from stablecoin issuers only if those tokens are fully reserved, and Tether has admitted to misrepresentations and violations in its recent settlement with NYAG’s office. Finally, these admissions and other concerns could raise reputational risk concerns for large domestic banks that are able to accommodate a significant portion of these reserve assets.

Higher level institutions are joining in on the discursive control of the dollar stabilized currency.

Second, the process of cryptocurrency gentrification is also a prerequisite for stablecoin oversubscription.

According to Gemini’s report released on April 21 of this year, 14% of Americans are now crypto investors. This means that 21.2 million American adults own cryptocurrencies, and other studies estimate this number to be even higher.

Meanwhile, a crypto user report published by the UK payments app STICPAY expenses that cryptocurrency deposits grew 48 percent in the first quarter of this year, while legal deposits remained unchanged. The report shows that the number of STICPAY users converting fiat currency to cryptocurrency increased by 185 percent compared to the same period last year, while the number of users exchanging cryptocurrency back to fiat currency decreased by 12 percent.

The crypto market is growing at a phenomenal rate, which is directly contributing to the boom in the stablecoin market.

In fact, although the crypto bull market has weakened recently, the pace of stablecoin issuance has not stopped, instead, the issuance of USDT and USDC has entered a rapid growth phase. Take USDC for example, on May 22, four days after 519, USDC alone issued an additional 5 billion pieces.

Finally, there is the driving force of decentralized financial innovation.

In March 2020, Makerdao decided to add the stable coin USDC as DeFi collateral, and now about 38% of DAI has been issued by USDC as collateral. According to the current market value of DAI of $4.65 billion, the number of USDC pledged in Makerdao alone is as high as $1.8 billion, accounting for 7.9% of total USDC issuance.

So, what impact will such an abundant amount of stable coins have on the crypto market?

  1. The financial market is booming, based on the flood of fiat currencies, and so is the crypto market
    When we ask “how will the flood of stable coins in US dollars affect the crypto market”, we might as well ask “how has the flood of US dollars affected the US stock market”.

What has driven the decade-long bull market in U.S. stocks? The answer is obvious: abundant dollar liquidity.

Since 2008, the Federal Reserve has implemented four rounds of QE, or quantitative easing, importing trillions of dollars into the capital markets, which has directly driven a 10-year bull market for the Nasdaq, Dow Jones Industrial Average, and S&P 500.

Financial markets are booming and built on a flood of fiat money, and crypto markets are bound to follow such laws. Only that in the great reshuffle of the financial market with rising and falling tides, the crypto market may also be hit hard, but behind the up-and-down K-line, what remains unchanged is that BTC price is steadily following the trajectory of S2F.

So, even though the crypto market went through a violent 519 washout, it won’t change Bitcoin’s strong ability to repair itself, a “robustness” that puts any financial asset in the world to shame.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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