As Crypto Markets Lose Billions in Market Cap, Stablecoin Trading Volumes Surge Over 200%

  • Trading volumes of certain stablecoins increased by over 200% in the past 24 hours.
  • Circle's (USDC), MakerDao's (Dai), and True USD (TUSD) all experienced more than a 200% increase in trading volume - while cryptocurrency price continued to decline. 

The market capitalization of most cryptocurrencies continues to decline sharply, however, several popular stablecoins experienced a considerable 200% increase in total trading volume during the past 24 hours - according to data fromCoinMarketCap.

Notably, the cryptocurrency market lost about $30 billion of its total market value last week (on November 14th), but during this same time period, the prices of certain USD-backed cryptoassets have remained stable (and gone up slightly).

Specifically, recently launched stablecoins including Circle’s (USDC), True USD (TUSD), and DAI have all seen more than a 200% increase in 24-hour trading volume. This, despite a huge sell-off in the larger cryptoasset market.

Stablecoins Become "Flight To Safety"

It now appears that stablecoins are proving to be a “flight to safety” as the prices of non-collateralized cryptoassets continue to decline. Because of strict regulatory policies, fiat currencies are often hard to obtain via crypto exchanges - which leaves stablecoins as the best available alternative to hedge against more volatile cryptocurrencies.

As most crypto enthusiasts would know, the controversial Tether (USDT) remains the most dominant stablecoin. However, due to heightened fears about Tether’s (the company that issues USDT) banking operations, many crypto traders may feel more comfortable dealing in the increasing number alternative stablecoins now available.

In addition to the USDC, Dai, and TUSD, other stablecoins including the Gemini Dollar (GUSD) and the Paxos Standard Token (PAX) have been released into the volatile digital currency market.

Significantly, bitcoin’s drop below the $6,000 psychological support level last week may have led to many investors selling their cryptocurrencies - in order to buy more stablecoins.

USDC Trading Volumes Surge Nearly 400%

Data from CoinMarketCap shows that USDC’s 24-hour trading volume increased almost 400% from slightly above $5 million on November 14th (before bitcoin’s plunge below $6,000) to over $25 million in a span of only 24 hours (by November 15th).

Moreover, USDC’s substantial increase in trading volume also helped it move into the ranks of the world’s 50 largest cryptocurrencies in terms of market cap. At press time, USDC’s total market capitalization is over $144 million and its trading at about $1.01.

As CryptoGlobe reported recently, Malta-based cryptoasset exchange, Binance, which is notably the world’s largest crypto trading platform, has started to list USDC.

As covered, Australia-based cryptoasset exchange, Coinjar’s CEO, Asher Tan has predicted that stablecoins will be the “next big thing.” Tan believes that collateralized digital assets have many more legitimate use cases, other than simply hedging against market volatility.

Weekly Newsletter

Bitcoin Dominance Bump Unlikely to Last — Market Analysis

The entire crypto market seems to be going risk-off and turning to a state of correction, after an excellent start to 2020 throughout January and February which saw significant gains. This is reflected in the brief pop in Bitcoin market dominance. But in the longer term, it’s a different story, and we must always bear in mind the intercourse the conflicting trends of different timeframes – and how they can still agree with each other.

Here, rather than focusing on any specific crypto, we’ll look at the market as a whole using some trusted indicators.

We first look at a small-to-medium-timeframe chart of Bitcoin plus Bitcoin’s market dominance arrayed against the “Others” market dominance, Others being a basket of all altcoins below the top 10. This panoply of charts gives us a broad insight into the whole market.

just some speedbumpsBTC chart by TradingView

During January and some of February, we can see clear risk-taking in the form of a rising altcoin market share. Bitcoin’s price was rising even as its dominance was falling: peak altcoin conditions, where so much buying is coming into the system that more entities are buying Bitcoin than selling Bitcoin for altcoins, even when there is a lot of that.

This pattern has reversed in the past few days, with Bitcoin’s price falling even as its dominance rose, with altcoins being sold back into Bitcoin. The market was overheated in the short term, and people are wisely hedging their profits.

But this trend is unlikely to last. Zooming out and looking at a chart of Ethereum/Bitcoin and both dominance charts again (with Ethereum being a general proxy for the altcoin market), we see a different story.

the bigger picture says the opposite thingETH chart by TradingView

There is a lot going on here. First we can note that Ethereum – again, bearing in mind its role as a general proxy for altcoins – has retaken a very important inflection line that it lost during 2019, the dotted line. It is likely, based on this line retaken last week, that Ethereum is starting a long term uptrend against Bitcoin – and that altcoins in general will do the same in the long term.

Moving to the Bitcoin dominance display in the middle panel, we see an agreement of the above thesis. Bitcoin’s dominance has fallen below its own critical level, namely the area near and above 70%, which BTC held for a while during 2019. This level had not been held since 2017, when Bitcoin put in its all-time-high – and it now looks to be trending steadily away from it again.

This trending away will again provide the space for altcoins to grow in market share, and we have already seen the beginning of this trend during 2020. Perhaps what we have seen was only ‘Round One’.

And moving below to the Others dominance, we see that this indicator has, yet again, taken an important level of 6% and is likely trending away from it. This is the same message in reverse: this level was first tickled during the first real altcoin mega-rally, in the beginning of 2017, and stayed above it for years. It was lost for a time in 2019, about the same time Bitcoin retook its level of 70%.

The larger trends are likely moving in the opposite direction than the shorter ones. Bitcoin's price, based on these indicators, is likely to continue rising even as its market share continues to falls. Altcoins, after years of being battered, are likely to continue gaining market share; and in that situation, the pie can only be getting larger overall.

The views and opinions expressed here do not reflect those of and do not constitute financial advice. Always do your own research.

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