Stablecoin Demand Is Going Through the Roof; Exchange Reserves Hit an ATH

Stablecoins dominated 2020 and now they are ready to take over 2021 as well.

Last year, the market capitalization of fiat-pegged stablecoins went from just under $5 million to $27 billion. As of writing, the stablecoin market cap has surpassed $30 bln, as per CoinGecko.

While Tether (USDT) remains the king of the stablecoins with a $22.75 billion market cap and $20.60 billion trading volume, as per Messari, Coinbase and Circle’s USDC is catching up fast. With a market cap of $4.21 billion, USDC is managing $693 million in volume.

USDC actually printed nearly 1 billion in December compared to USDT’s just 2 billion.

Back in Dec. 2019, USDC’s market cap was $500 million which surged to $1 billion in July 2020.

“The growth of USDC in 2020 was in large part fueled by the growth of Decentralized Finance (DeFi), where USDC remains the number one fiat-backed stablecoin of choice by both users and developers,” said Pete Kim who helped build USDC 2.0 and Coinbase Wallet. “USDC acts as a medium of exchange between different protocols,” he added.

Recently, Coinbase announced the latest version of USDC, which according to Kim was “long overdue for an upgrade.”

Stablecoins have been boosting liquidity in the cryptocurrency market and enabling trading to be faster and cheaper.

An interesting trend has been seen in the market regarding these fiat-based crypto assets. While the digital assets like BTC and ETH have been moving off the exchanges for HODLing, the stablecoin reserves of these cryptocurrency trading platforms have hit an ATH at 3.137 bln, up from 1.3 bln in August, as per data source Crypto Quant.

Binance’s stablecoin BUSD’s exchange reserves also hit an ATH as 327 million BUSD flew into exchanges in the past three weeks.