The COVID-19 pandemic has caused a great demand in crypto-currency tokens known as stablecoins, as investors have been very bearish in many equity markets world-wide.
Stablecoins are tokens that have value that is pegged to traditional fiat currencies, such as the US Dollar, and in more recent times, pegged to exchange-traded commodities like gold.
According to CoinDesk, top U.S. dollar-backed stablecoins that include Paxos Standard (PAX), Tether (USDT), USC Coin (USDC), Binance USD (BUSD), and TrueUSD (TUSD), have maintained their market capitalization during a time when the United States has seen massive sell-offs in all of its major equity indices. Speed of convertibility and liquidity are the merits that stablecoins provide for traders and investors in crypto markets which would otherwise take hours or days to process in more traditional forms of the currencies. At the same time, the month of March has seen more mainstream cryptocurrencies taking much larger hits in value, including the goliaths Bitcoin (BTC) and Ethereum (ETH), which lack the convertibility advantages that stablecoins provide.
All in all, several analysts believe the current market volatility has really highlighted the merits of stablecoins for investors that are looking for safe haven refuge from equity asset exposure in the short-run but who also wish to remain in the market with less risk exposure.
As the world sees the worst pandemic since 1918, the “stable” in stablecoin holds up to its reputation as global equity markets continue to be very uncertain, and simultaneously, the merits that are lauded about the benefits of decentralized, electronic ledger, speedy and convenient cryptocurrency continue to develop and evolve.