Good Morning & Happy Friday! The April woes in the markets continue as the DOW closed lower for the 4th straight losing session. The tumultuous trading day comes ahead of the release of the March jobs reports. The fear is that too-hot of a jobs reports will translate to rising inflation and the Fed keeping rates higher for longer.
Bitcoin and other cryptos started to creep back and take back some of the losses they suffered in the latest pullback. The big news in crypto is around one of the industry’s biggest names: Ripple. The group has notoriously been fighting the SEC for years now, but the latest news is a much more positive update. The group has announced their new stablecoin. Read more about that and the broader stablecoin market below. And as always, see how our DeFi pools are performing.
Crypto Spotlight: Stablecoin Wars Continue to Grow
Image by Financial Times
Ripple, which is the group behind the XRP Ledger, just introduced their own US dollar-backed stablecoin. The stablecoin market continues to trade and grow strongly. It is currently a $150 billion market today. Forecasts estimate that the stablecoin market could exceed to $2.8 trillion by 2028.
Remember, stablecoins are typically pegged 1:1 to a fiat currency. Most are US dollar denominated stablecoins, and therefore 1 stablecoin is equal to 1 dollar. Most of the stablecoin issuers then do what most financial institutions do, which is to hold their dollars in cash or cash equivalents. AKA US Treasuries.
Last year, a popular picture that was touted around showed off just how big the stablecoin market is getting. If stablecoins were a country, they would be the 16th largest sovereign holder of US Treasures. They have outpaced the likes of Norway, the UAE and Germany. This data is quickly becoming outdated and the stablecoin market is only growing. Theoretically, this number has been increasing.
The $150 billion dollar market has shown a clear favor towards Tether (blue line), a group registered out of the British Virgin Islands. Interestingly enough, the dip in USDC (purple) can be traced back to the collapse of Silicon Valley Bank which caused the USDC coin to temporarily de-peg from the dollar as fear spread of a collapse on USDC’s parent company, Circle, who banked at SVB. Thankfully, Circle was very open and transparent in their holdings. They are also traditionally over-collateralized and diverse in their banking partners. Either way, the trust has been broken and has taken some time to build as you can see in the below graph.
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