The demand for stablecoins, cryptocurrencies designed to maintain a stable market price, has seen a delirious surge as investors running from high volatility in cryptocurrency and global markets look for safe assets for their money.
A weekly update from Luno showed that stablecoin balances on cryptocurrency exchanges have now surpassed all-time high.Investors have $2 billion on the sideline waiting for the buy signal.
The current surge in stablecoins is partly driven by the global economic crisis and renewed activities by Facebook to see Libra become a reality.
A stablecoin refers to a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset.There are a number of stable coins in circulation today, and a number more have been attempted in the past (with varying degrees of success).
Stablecoins came to limelight in 2018 with promises of improving financial access and creating a viable alternative for nations burdened by hyperinflation or experiencing friction in cross-border payments and remittance.As many as 120 stablecoin projects were created in 2018 according to data from Bloomberg.
Most of the stablecoins are pegged to the US dollar.
However, some are pegged to the price of other cryptocurrencies or even commodities like silver or gold.
While tether and a few other coins were responsible for the popularity of stablecoins, Facebook’s Libra project announced in June 2019 signaled a surge in interest around stablecoins and the possibilities for central bank digital currencies (CBDCs).
How Libra, regulation could push cryptocurrency market into maturity in 2020 “The global crisis brought on by COVID-19 is an opportunity for stablecoins to deliver on these promises and use cases, especially as governments try to deliver stimulus money quickly to large populations that desperately need it,” said Marek Olszewski, co-founder of cLabs the company behind Celo, a mobile-first permissionless platform that makes financial tools accessible to anyone with a mobile phone.
“The global economic and health crisis has reinvigorated the use of stablecoins, as well as the discussion of digital dollars and central bank digital currencies .With close to six billion smartphones with active mobile subscriptions in the world, we are nearing a reality where an easy-to-use stablecoin can reach a significant portion of the world’s population.”
Facebook is looking to hire 50 people for its payments subsidiary Calibra – charged with creating a wallet for storing and sending Libra – to start work at its offices in Dublin by the end of 2020, according to the Irish Times on Monday.
The social media giant founded Calibra in 2019 as part of its mission to develop a digital wallet for the Facebook-backed Libra cryptocurrency project.The team in Ireland has already assembled a small team in Dublin but now plans to expand this significantly.
Last week, Bloomberg also reported that Facebook and its partners will allow their Libra cryptocurrency project to support multiple versions of the digital coins, the majority of which will be backed by individual fiat currencies like the U.S.
dollar, as part of changes made to appease skeptical regulators worldwide.
Nevertheless, the rise in demand for stablecoins is yet to impact significantly on the price of bitcoin and other cryptocurrencies.The Luno weekly update showed that bitcoin price reached around $7,400 last week and is struggling to surpass the $7,000 area this week.
“It will be interesting to see if the price holds above the 50-day moving average and continues towards the $8,000 area where other important moving averages are found,” the cryptocurrency exchange noted.
Beyond prices, the futures market for bitcoin is also in the bear territory as some platforms still see negative premiums for their June contracts – so-called backwardation (a situation in which the spot or cash price of a commodity is higher than the forward price).
CME bitcoin traders, however, are still more bullish than retail, but the overall trend for futures premiums has been declining since February.
“There could be a sign of increased adoption, with addresses holding more than 0.01 bitcoin increasing rapidly.However, this could also have different explanations, i.e.whales moving coins through coin mixing services for security reasons.Other metrics tell us that the demand on the Bitcoin network is dropping, which is a bearish signal,” Luno noted.Get real time updates directly on you device, subscribe now.
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