The avalanche in the encrypted world has caused a large amount of wealth to evaporate instantly, and the phenomenon of money shortage in the currency circle is obvious. The surge in trading volume after the crash is calling for more stablecoins to enter the trading market.
In this context, Tether "printed" as much as USD 1.575 billion USDT in 30 days, which is in line with the needs of the encryption market. The volume of stablecoins such as USDK, USDC, and GUSD has also entered a blowout development, and the speed of printing money is comparable to that of the Federal Reserve.
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Adding 480 million USDT in six days, Tether prints money faster than the Federal Reserve
The latest data from Tokenview shows that from March 25th to March 30th, in six days, Tether issued a total of 4 USDT transactions, each USD 120 million, totaling USD 480 million. Change the previous practice of issuing up to 60 million U.S. dollars each time.
In the past month, Tether has newly issued 700 million US dollars. According to data from the market website Coingecko, the current market value of USDT exceeds 4.2 billion US dollars. In just one month, the total market value has increased by 22%, and Tether’s money printing speed is comparable to that of the Federal Reserve.
In fact, it is not only USDT that is rapidly increasing in market value, but also other stablecoins.
At present, the total market value of seven digital currencies including USDT, USDC, PAX, TUSD, DAI, GUSD, and BUSD has soared from US$5 billion at the end of 2019 to US$7 billion at present, an increase of 40%. Among them, most of the market value comes from USDT.
In contrast, the total market value of more than 5,000 cryptocurrencies in the world has fallen from 350 billion US dollars at the end of 2019 to the current 182 billion US dollars, a drop of more than 40%. The market value of 7 stablecoins can "go up against the wind", which fully demonstrates the stablecoin market space and huge potential.
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Where did the printed money go?
In the real world, the legal currency issued by the central bank is distributed to enterprises and residents through many commercial banks to expand reproduction and consumption investment. The central bank regulates the scale of deposits and loans of commercial banks through the deposit reserve ratio. The money that enters the market through the circulation of commercial banks is collectively referred to as M2.
So, who is playing the role of "central bank" and "commercial bank" in the cryptocurrency world? Before answering this question, let's analyze a set of USDT token circulation data.
From March 12th to March 22nd after the currency price plummeted, USDT tokens issued on Ethereum were analyzed. On the whole, the wallets of at least 17 business entities participated in the distribution process for the additional USDT issued during this period. Among these business entities, exchanges accounted for the majority, and lending platforms accounted for a small part, including Bitfinex, OKEx, Nexo, Well-known exchanges or institutions such as RenrenBit.
Stablecoins that enter exchanges and institutions enter the hands of financial investors through exchange and lending.
From this point of view, in the encrypted world, stable currency issuers are equivalent to central banks; exchanges and lending platforms are equivalent to commercial banks; cryptocurrency investors are equivalent to consumers in the traditional financial world. It shows that the cryptocurrency world still follows traditional financial laws.
It can be seen that TEDA, which plays the role of the central bank, issued a huge amount of USDT mainly with institutions, and then injected into the market through institutions. Just like the Federal Reserve, except for extreme situations such as the new crown epidemic, they will not directly send money to American citizens, but inject liquidity into the market through treasury bonds and other means.
It is worth mentioning that, due to the problem of excessive USDT issuance, Tether would encounter fierce criticism every time it issued additional USDT. However, the criticism seems to have decreased a lot recently. The root cause is the increase in market demand.
Especially after March 12th, after Bitcoin experienced an epic plunge, the wealth in the market evaporated, and the entire market was extremely short of money, resulting in a shortage of USDT, resulting in a USDT premium of up to 6%. In this context, Tether has continuously issued additional USDT to meet the market demand, and the USDT premium has decreased accordingly, reducing transaction and investment costs, which is naturally welcomed by investors.
If we compare this phenomenon with the traditional financial world, it is not difficult to understand the reasons behind it. In the traditional financial field, once a liquidity crisis occurs in the market, the central bank often reduces deposits by reducing deposit interest and deposit reserve ratio, and at the same time increases the motivation of banks to lend, thereby solving the liquidity crisis in the financial market.
But in the encrypted world, although Tether plays the role of the "central bank", it does not have the functions similar to the Fed's QE and lowering deposit interest rates, nor does it have the function of the Chinese central bank to lower the deposit reserve ratio. Real gold and platinum - USDT.
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On March 30, Algorand officially announced that the USDT on the Algorand blockchain has been officially launched, and 1 million USDTs have been issued on the Algorand blockchain. Become another new member of the Tether token issuance network.
Since then, other blockchains supported by Tether include BCH, EOS, ETH, Omni, and TRON, etc. Tether’s money printing channels are constantly increasing. So, why did Tether choose so many public chains to issue tokens?
At present, the most widely applicable channels for USDT are the Omni protocol and the ETH network, which mainly have two defects, namely slow transfer speed and high transfer fees.
In terms of transfer speed, take the Omni version as an example. Because it is developed based on the Bitcoin blockchain, the processing speed on the chain is slow and the confirmation time is long, so the transfer usually takes a lot of time.
In terms of transfer fees, the Omni version transfer requires at least 4 USDT, and a transfer during the bull market can even cost hundreds of USDT, which is something no trader would like to see. In this regard, although ETH has improved, due to the congestion of the ETH network, the transfer fee is not low.
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Comparison of different versions of USDT
Take the EOS network as an example.
In terms of transfer speed, the actual TPS of EOS can reach 3000-4000 at present, and it can reach tens of thousands in theory. The block generation speed of EOS has gradually changed from the original few minutes to the current 0.5 seconds, so that USDT transfers can be confirmed in seconds.
In terms of transfer fees, transfers in the EOS system require EOS tokens to rent three system resources: CPU, RAM, and NET. Although RAM (memory) costs are required during the transfer process, they are almost negligible, so it can be said that "transfers are free".
In late March, Tether issued the stable currency USDT on BCH through the Simple Ledger Protocol. In this regard, Tether Chief Technology Officer Paolo Ardoino said that our latest cooperation with Bitcoin Cash will provide Tether with various benefits. This cooperation will also Supporting more applications on the Bitcoin Cash chain, Tether will facilitate payments for these applications.
At present, the main advantage of Tether is not only reflected in the market value, but also the diverse support of different networks is also reducing the USDT systemic risk rate.
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A thriving stablecoin market
According to the latest news from Theblock, stablecoins are off to a strong start in 2020. While 90% of the total value of stablecoins still belongs to Tether, USDC grew at the same rate as Tether (33%) in Q1 2020, and approached $1 billion. Tether is now worth more than $4 billion on the Ethereum chain, up more than 75% year-to-date.
For the first time, the cumulative trading volume of stablecoins exceeded $90 billion in one quarter, an 8% increase from the fourth quarter, while in the first quarter of 2019, the figure was only $23.8 billion, a year-on-year increase of 280%.
The latest data from Coinmetrics shows that in the past month, there has been a massive influx of stablecoins on the Ethereum chain, of which BUSD has increased by 186% in 30 days, USDC has increased by 55.4%, USDT has increased by 51.5%, and PAX has increased by 26.5%. .
The development of the stablecoin market in 2020 can be described as prosperous.
In response to Tether’s continuous issuance of USDT and the continued surge in the market value of stablecoins, Dr. Omer Ozden, chairman of Stonewood Capital, said that USDT is the most popular stablecoin in the world and has the widest range of applications. I call this year the "Year of Stablecoins" because we see that on the one hand, stablecoins have been more widely used, on the other hand, some stablecoins have also received regulatory approval, and Libra issued a white paper. The additional issuance of Tether is also part of this trend. Some additional issuances are also related to the use of USDT as a loan in the market.
In fact, the prosperity of the stable currency market also has more far-reaching significance.
Weiss Ratings, a cryptocurrency rating agency, posted on Twitter that with the emergence of negative interest rates in the United States, it is no longer a good choice for people to store their money in banks. Stablecoins, on the other hand, are pegged 1:1 to the U.S. dollar. Holding stablecoins makes more sense than holding dollars. The old financial system is showing its flaws.
What role can the stablecoin market play in this increasingly volatile financial market? As OKLink Rabbi said in the Hotbit live broadcast room, in the face of major global changes, stablecoins will play a big role in improving liquidity, maintaining stability and ecological layout.
