Since the first stablecoin was introduced in 2014, the stablecoin industry has exploded with innovation and interest — as more and more people begin to realize the unique capabilities afforded by assets with a pegged value.
In 2021, this growth has only accelerated, with stablecoin trading volumes and usage statistics ballooning as stablecoins continue to become the default way to pay in the cryptoverse.
Here, we take a look at some of the most popular stablecoins trends of today, and examine why stablecoins are likely to continue their meteoric growth in the months and years to come.
Yield-Generating Stablecoins Now Exist
As their name suggests, stablecoins are designed to maintain a stable value, that is, they’re designed to resist volatility.
With the first generation of stablecoins, like Tether (USDT) and TrueUSD (TUSD), users were able to exit volatility and conserve the value of their portfolio without much difficulty. This led to a boon for traders, who now had a way to lock in their gains without completely exiting the market by converting back to fiat.
However, this comes with a major downside: users holding stablecoins also miss out on the potential gains they could have received had they been holding volatile cryptocurrencies instead — like Bitcoin (BTC) or Polkadot (DOT). Volatility Is Increasing
But this is changing.
With the advent of newer stablecoin solutions, like the USD-pegged CHIP stablecoin, users can now continue earning a profit, even if they’ve exited all of their volatile positions.
Unlike other stablecoins, which require external protocols, like yield farms or lending platforms to turn a yield, users generating CHIP stablecoins automatically receive a yield-generating token to boot — known as yBXTB. By holding this yBXTB, users gain a fraction of the CHIP transaction fees, and essentially earn more stablecoins simply for minting CHIP.
As a result, users can both exit volatility and still earn a strong yield for the first time, marking the beginning of what will almost certainly become a new DeFi trend — yield bearing stablecoins.
Volatility Is Increasing
In the last six months, the volatility of most major cryptocurrencies has shot through the roof, and Bitcoin (BTC) has seen its 30-day volatility climb from 2.69% to almost 4.3% during this time.
For speculators, this has brought with it incredible trading opportunities, with many proficient swing and day traders turning excellent profits in this time.
But most cryptocurrencies aren’t actually designed to be mere speculative instruments — they’re designed to be alternative currency systems, used for making payments and transacting.
Though volatility is a desirable trait for traders, it’s not so desirable for merchants, who aren’t likely to want to accept the risk that they could lose a significant fraction of their cash reserves if the market happens to tank.
But with there being more cryptocurrency users than ever before, and stablecoin trading volumes skyrocketing, it appears more likely than not that stablecoins will become the assets of choice for merchants looking to tap the massive cryptocurrency community without exposing themselves to unnecessary risk.
And based on the meteoric uptake of stablecoins, it may not be too long until they’re generally accepted by merchants and retailers of all sizes.
They Are Becoming More Capable
When you think of a stablecoin, odds are the first thing that will come to mind are the typical stablecoins pegged to fiat currencies — like the US dollar (USD) or euro (EUR). These are a class of stablecoin known as fiat-pegged stablecoins.
But these are just the first wave of what is proving to be a burgeoning industry, with a whole range of stablecoins emerging that are instead pegged to a wide variety of other asset classes, such as commodities like gold (e.g. CACHE gold and Tether Gold) and even an entire basket of assets, such as the recently launched BLEND.
The latest generation of stablecoins can have their value tied to practically anything, including cryptocurrency derivatives like futures positions, leveraged options, shares, and almost anything else.
Unlike fiat-pegged stablecoins, these stablecoins can actually increase or decrease in value, giving them speculative potential, while also benefiting from the underlying utility that comes with maintaining a price pegged at that of another asset.
With stablecoins that can now be backed by almost anything, the range of use cases for the technology has never been greater. And with Facebook’s Libra stablecoin due for launch later this year, all eyes are about to be on the stablecoin industry.