It seems that the Coronavirus emergency – Covid-19 – is increasing the demand for stablecoins.
This is revealed by Jeremy Allaire, co-founder and CEO of Circle, the company that issues USDC together with Coinbase, who wrote in a tweet:
“USDC surging in market demand over the past days, reaching new ATH at $568m in circulation. Fascinating to see “flight to safety” within the crypto macro market, but also demand for high quality USD liquidity for markets”.
1/ #USDC surging in market demand over the past days, reaching new ATH at $568m in circulation. Fascinating to see "flight to safety" within the crypto macro market, but also demand for high quality USD liquidity for markets.
— Jeremy Allaire (@jerallaire) March 13, 2020
Allaire also adds that it is gratifying to see this completely new, entirely digital and blockchain-based monetary infrastructure working, although it is not at all exciting to see markets collapse.
He also argues that demand for crypto-dollars could still increase significantly because people and companies want a digital, fast, global, secure and cost-effective architecture to send and receive payments with less counterparty risk and greater security.
Finally, Allaire points out that, after the pandemic, companies may need to rely on decentralized and trustless infrastructure with programmable dollars (through smart contracts) and public chains.
Surely this difficult moment at the social and health level is not the best scenario to celebrate professional goals, but what Allaire points out cannot go unnoticed.
However, this increase in market demand does not affect all stablecoins pegged to the US dollar. It certainly concerns Tether (USDT), which is by far the stablecoin with the largest market capitalization, for which just like USDC there is an increase in demand these days.
How are the other stablecoins behaving?
As far as Paxos Standard (PAX) is concerned, the third stablecoin pegged to the dollar by market capitalization, there is an increase in demand, but very similar to what had already happened in mid-February. In fact, the market capitalization has fallen and only increased again in the last few days.
For USDT and USDC, the last few days have seen the highest ever peaks per market capitalization.
TrueUSD (TUSD), the fourth largest, has also been declining since the beginning of March and has only grown in the last few days but without yet reaching the highest levels recorded at the beginning of last year.
Binance USD (BUSD), on the other hand, shares the period of great success with USDT and USDC, recording its historical high, while for DAI the issue is more complex.
The new DAI has only been in existence for a few months and is gradually replacing the old SAI. After peaking at over $100 million in capitalization in November 2019, SAI has now fallen below $20 million, while DAI first rose to almost $130 million in mid-February, before falling below $100 million in recent weeks.
DAI is probably affected by the difficulties that DeFi platforms are experiencing in recent weeks, first with the bZx/Fulcrum hack, then with the problems arising from the crash and congestion of the Ethereum network.
For example, the value of DAI locked in DeFi instruments has collapsed lately. After peaking at over $85 million on March 8th, it is now less than half.
However, its value has not only held up very well to the impact, but paradoxically it has also increased, as on March 14th it even rose to $1.11. In fact, since March 12th onwards the value of DAI has practically always been above $1, which is not at all common to other stablecoins pegged to the American currency.