Editor's Note: This article comes fromHoneycomb Finance News (ID: fengchao-caijing), Author: Kyle, reproduced by Odaily with authorization.
Editor's Note: This article comes from
Honeycomb Finance News (ID: fengchao-caijing)
Honeycomb Finance News (ID: fengchao-caijing)
The price growth of Bitcoin has contributed to the further growth of the stablecoin market. A report by overseas institutions pointed out that in the past three months, the total supply of global stablecoins has increased from US$5.68 billion to US$9.62 billion, an increase of nearly 70%. Issuers of stablecoins, including USDT and USDC, use intensive additional issuance to meet the market's transaction needs.
Judging from the statistical chart of DAppTotal, the rate of issuance of stablecoins this year has far exceeded that of previous years. William, a senior analyst at OKEx, believes that since the stablecoin issuer is not a non-profit charitable organization, for the sustainable operation of the project, a certain amount of stablecoins must be issued in excess, which is an inherent flaw in the stablecoin design.
Previously, USDT had been widely questioned due to issues such as the opacity of the U.S. dollar reserve. Considering the systemic risks of insolvency and money laundering, both the European Central Bank and the G20 have recently called for comprehensive regulation of stablecoins.
When stablecoins are "advancing bravely" with the cryptocurrency market, investors have to reasonably assess the risks of holding stablecoins.
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Increased supply by nearly 70% in 3 months
On the eve of the halving of Bitcoin production, the cryptocurrency market started a wave of upsurge. In the past month, Bitcoin has risen by more than 30%, returning to the $9,000 mark.
According to statistics from The Block, since February 5 this year, the total stablecoin supply has increased by 69.4% from $5.68 billion to $9.62 billion. At present, USDT issued by Tether still dominates the stablecoin market, accounting for more than 84% of the supply, followed by USDC and PAX, which rank second and third, with 7.4% and 2.6% shares respectively.
USDT accounted for the bulk of the increased stablecoin supply. According to the data of Feixiaohao, from February 4th to May 4th, the market value of USDT surged from 4.66 billion US dollars to 6.4 billion US dollars, and the supply increased by 1.74 billion US dollars within 3 months. During the same cycle, USDC’s supply increased from $434 million to $713 million, and PAX’s supply increased from $220 million to $250 million.
Statistics from DAppTotal show that since February this year, the total circulation of global stablecoins has almost risen in a straight line, and the rate of issuance has far exceeded that of previous years.
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When the price of Bitcoin is soaring, the stablecoin market is also expanding rapidly, becoming the main currency team that cannot be ignored in the field of cryptocurrency.
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The massive additional issuance is not only due to market demand
The issuance of stablecoins has become the norm. According to statistics from overseas media, in 2019 and 2020, most mainstream stablecoins will be issued on a large scale, among which USDT, BUSD and DAI are the main ones.
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The issuance of stablecoins in 2019 and 2020
The increasing supply of stablecoin issuers appears to be related to growing market demand. As the main medium for investors to enter the encrypted world, stablecoins act as deposit or withdrawal channels. When the Bitcoin market shows a downward trend, investors often exchange their assets for stablecoins to avoid risks; and when the rising market starts , some investors will exchange other encrypted assets by purchasing stable coins.
However, market demand may not be the only factor behind the increase in stablecoin supply. William, a senior analyst at OKEx, believes that issuing additional or over-issuing stablecoins is a last resort for stablecoin issuers, "behind this is the inherent flaw in the design of stablecoins."
William said that most stablecoins are currently designed to be collateralized by US dollar assets in the real world. From an economic point of view, economist Krugman's "impossible triangle" must be satisfied: that is, stablecoins can be used when the currency exceeds There are only two choices among hair, fixed price and free flow, and the other is discarded.
If the stable currency must meet the two conditions of price stability and free convertibility, the option of currency over-issuance must be abandoned. In William's view, the current stablecoin is bound to be overissued, because the stablecoin issuer is not a non-profit charitable organization. For the sustainable operation and profitability of the project, a certain amount of stablecoin must be overissued, and these stablecoins There is not a sufficient amount of U.S. dollars as collateral behind it, "this is the biggest contradictory flaw in the current stablecoin design."
In addition, some market analysts believe that due to the impact of the new crown virus epidemic on the global economy, the Federal Reserve has printed a large amount of money and cut interest rates one after another, which has led to a decline in investors' willingness to hold US dollars, and "stable currency provides more stable currency than traditional investment." Good return", and therefore welcomed by the market
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ECB calls for regulation of stablecoins
Although the stablecoin market continues to grow, it has always been accompanied by controversy since its birth. This is especially true for the market leader USDT, which has been questioned and criticized many times because of the opacity of the US dollar margin and collateral.
On May 5, the European Central Bank issued a report stating that there are currently gaps in regulations on stablecoins, and a sound regulatory framework needs to be established in order to deal with risks. The European Central Bank specifically mentioned that stablecoins may have systemic risks. If assets lose their fixed value support or deviate from expected levels, users will not be able to cash in their exact "stable" values.
More than a month ago, the G20 Financial Stability Board (FSB) also emphasized the risks of stablecoins in a research report. The FSB believes that stablecoins pose associated risks to the financial stability of the global economy and therefore require nuanced regulation. The FSB recommends that members of the G20 remain cautious about stablecoins in their respective countries, especially to prevent stablecoins from being used for money laundering and terrorist financing.
Regulatory attention to the risks of stablecoins will undoubtedly have an impact on the stablecoin market. In the past two years, TUSD, BUSD, USDK and other auditable stablecoins that operate under the regulatory framework have been born one after another. Although they cannot shake the status of USDT in a short period of time, they have shown a trend of embracing supervision and standardized operation.
According to William, the current stablecoins in the market can be divided into two categories. One category is stablecoins that have passed regulatory approval and are regularly audited by relevant agencies to meet compliance requirements; the other category is non-transparent stablecoins that do not meet regulatory requirements. currency. "The former is safe, and the latter is destined to be eliminated in the future."
