Stablecoin Printer Goes Brrr… Signaling an Early Bull Run in the Crypto Market?


During the past few months, stablecoins have seen immense growth which has led the total issued stablecoins surpassing $10 billion last week and their free float supply exceeded this figure this week.

According to analyst Permabull Niño, this surge in stablecoin supply might be giving off some signals.

He points out how during the 2017 bull run, there was “extremely active printing” of stablecoins. During the bear market of 2018, this printing “flatlined” only to have semi-regular new supply during the chopping of 2019.

Now, in 2020, USD-pegged stablecoins’ printing is “picking up steam” which could signal that we are in an “early bull” market.

Total Stablecoin Supply 7-day % Change, BTC market cap

Tether accounts for 90% of total stablecoin supply

Most of this stablecoin growth comes from Tether (USDT), the popular USD-pegged coin accounts for about 90% of the total stablecoin supply.

As per Tether’s transparency page, more than $9 billion worth of USDT is currently in supply, out of which $5.7 billion are on Ethereum blockchain, $2.1 on Tron blockchain, $1.3 billion on Omni blockchain, and the rest on others like EOS, Liquid, and Algorand.

Tether’s largest markets by traded volume are Asia-based Binance and Huobi. According to a recent Coin Metrics report, USDT-ETH transfers are concentrated during Asian and European market hours.

“Stablecoins are a crucial part of the crypto ecosystem, and will only keep growing in prominence,” states the report.

Since the Black Thursday crash, while most non-stablecoin assets saw a drop in their market capitalization, stablecoins have experienced a surge in demand.

This demand could be from the increase in the number of investors holding stablecoins as “dry powder” in anticipation of a new bull run or Asian OTC traders pouring money into stablecoins, as an onramp to crypto markets or a general rush to safety.

It is also speculated this surge in demand could be a reaction to the shortage of US dollars.

US Dollar shortage

In a 2019 Asian Development trade finance curve, banks from about 50 different countries when asked about the largest barriers to expanding trade financing operations, 30% identified US dollar liquidity as the obstacle.

The global reserve currency US dollar is the lifeblood of international trade as “a lot of borrowing and commerce and investing is done in dollars.” And they have been running in shortage amidst the coronavirus pandemic that has wrecked the businesses and economies.

The US Federal Reserve expanded its balance sheet by more than $2 trillion since the February end. But this is tackling America’s shortage of the US dollar, not the world’s.

Out of this $2 trillion, only about $600 billion was for new emergency loans to address the global shortage of dollars.

Foreign central banks also borrowed over $200 billion from the Fed via swap lines by the end of March. At that time, the Fed allowed them to swap any Treasury securities they held in exchange for cash.

The Importance of the US dollar can be understood from the fact that “when you have a dollar crunch, it can turn a recession or contraction in activity into a financial crisis very quickly because the dollar shortage can trigger defaults and deleveraging,” Julia Coronado, a former Fed economist told Bloomberg.

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