Stablecoins Printer Going Brrr Since BTC Lows; Dollar’s Global Shortage Driving the Demand?

Ever since Bitcoin crashed to $3,850 in mid-March, fiat-backed stablecoins have been printing like crazy, with their market cap growing at a fast speed.

During this time, the market cap of Paxos has surged 20% and USDT’s 40%. While Circle and Coinbase’s USDC market cap jumped 55%, Binance’s stablecoin BUSD saw the biggest spike of 85%.

“The Fed isn't the only institution that's been printing away. Crypto finds its Jerome Powell in the form of stablecoins, which have been going BRRR since the BTC lows,” said trader Hsaka about this development.

This dramatic increase in the issuance of stablecoins over the past week could be because of the macroeconomic factor, “a global shortage of U.S. dollars,” said crypto data tracker Coin Metrics.

Coinmetrics USDC Supply Growth

Source: Coinmetrics

Stablecoins should benefit from the global shortage of dollars

The volatility of crypto assets is off its recent highs as global financial markets stabilize in response to central banks implementing monetary policy tools to inject liquidity into the market.

Meanwhile, stablecoins across the board have seen a dramatic increase in their issuance over the past month. Some market participants point to the increased need of these fiat-pegged cryptos to ride out market volatility while others to the continued growth in the lending market for these stablecoins. Increased retail activity and dip buying on exchanges is another one according to some.

But could it be because of the global shortage of US dollars which has the US dollar index spiking nearly 8% in the aftermath of the sell-off?

The US dollar is the global reserve currency and a meaningful amount of global commerce and commodities all transact in USD. Also, large amounts of US-dollar denominated foreign debt is issued by foreign companies and governments.

During the past few months, the coronavirus pandemic outbreak has wreaked havoc on global markets and economies as such disrupting both the demand and supply of global trade and the US dollar.

Fred excess reserves

“On the margin, stablecoins should benefit from the global shortage of dollars.”

The second-largest stablecoin USD Coin’s supply increased by over 50%, starting March 10 when the dollar shortage became severe and the USD strengthened.

Since then, however, the dollar index has given up some of its gains as the Fed instituted dollar swap lines with major central banks. In response, USD Coin issuance is also seeing slower growth.

When it comes to Tether, Ethereum-based Tether’s (USDT-ETH) usage is continuing to climb, its daily transactions surged to 143.32k on April 7th, its highest daily total since Sept. 2019. The transaction count on that day also eclipsed the 145.71k transactions on March 13th.

Both Omni Tether (USDT) and Tron Tether (USDT-TRX) however, still have significantly fewer daily transactions than USDT-ETH.

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