The rapid and explosive growth of stablecoins has been nothing short of stunning. In less than a decade an entirely new form of capital was created, on emerging technology infrastructure, that grew from nothing to a market cap and total supply which exceeds $130 billion.
Many skeptics have a hard time wrapping their heads around how the supply and backing of stablecoins has exceeded many major bank’s reserves. It’s difficult for those who have not directly experienced the benefits and utility of stablecoins to understand why people all over the world are choosing stablecoins as their primary form of money.
While there are many reasons for the growth of stable digital money, here are four main drivers of USD₮’s growth over the last half decade.
The US dollar is the world’s reserve currency. Around the globe, it is the most highly sought after national currency for a multitude of reasons. Foreign investors which range from individual people storing their wealth to foreign governments like to hold US dollars.
During times of political or economic stability, local currencies can become devalued around the world. We have seen this occur many times in modern history, including in the present day (Venezuela, Zimbabwe, Lebanon).
During periods of inflation, the rational choice is to exit the currency undergoing inflation and purchase assets which are not inflating (or at least not at the same rate). While this commonly can mean people purchase gold, real estate, equities, or other assets; it also can commonly result in investors acquiring US dollars.
Acquiring dollars allows individuals to still hold a highly liquid currency, whereas other less liquid assets would restrict their ability to easily utilize their money to purchase goods and services. However, acquiring US dollars can be difficult in countries which don't have easy access to financial infrastructure that supports dollars.
USD₮ massively simplified the ability for individuals around the world to access a financial instrument which is indexed to the market value of the US Dollar. This is because USD₮ does not require the individual to have access to a formal bank which allows them to hold dollar deposits.
All you need is a computer.
When economic or political instability strikes, inflation isn’t the only consequence. When currencies die, capital controls rise. Countries typically start to restrict the flow and exchange of money to prop up their currency. However, even countries not undergoing high levels of inflation can implement capital controls.
Capital controls refer to any restriction on the free flow of capital or any seizure of individual or corporate assets.
As most financial infrastructure is under government control in most nations, there is often no way to escape these repressive policies. USD₮ provides an alternative that allows entities and individuals to circumvent capital controls by utilizing an entirely different financial infrastructure.
This promotes freedom and can save lives when regimes become highly oppressive.
While US corporations may have a relatively easy ability to access and use dollars, companies around the world have a much harder time navigating global financial infrastructure.
Global banking infrastructure is highly inefficient, and for companies operating across multiple jurisdictions it is also highly expensive.
Whether it is access to an easier way to utilize dollar anchored payments or simply a way to allow a company to use a single currency for all payments, USD₮ empowers companies to conduct all payments in a single financial medium which is readily accessible.
It also can provide a more efficient way to store and even earn a yield on capital.
The growth of the DeFi ecosystem has been nothing short of remarkable. Brilliant minds from around the world have collaborated to build an entirely new approach to financial infrastructure where payments, exchanges, and assets can be listed, traded, and created in an entirely digital format.
These applications also eliminate traditional middlemen in the goal of providing more accessible and equitable financial services.
As DeFi applications exist solely on blockchain networks, they cannot natively utilize bank deposits. They need a digital currency to build into their products.
USD₮, as the world’s largest and most trusted stablecoin, is often utilized to satisfy that role. USD₮ is the most popular stablecoin and is used countless times per day to access DeFi applications.
The faster DeFi has grown, the more demand there has been for USD₮.
The Growth of Stablecoins Shows No Signs of Slowing
Despite the way that many traditional financial pundits are still left scratching their heads over why people use stablecoins and why there is so much demand for them, stablecoin issuance keeps soaring.
Stablecoins are easily one of the most successful and rapidly growing new financial products that has ever been introduced and one whose benefits become very clear to those who actually use stablecoins.
The four trends highlighted in this article are expected to continue:
1) The global economy continues to demand more dollars
2) More countries continue to try to obstruct the flows of capital
3) Companies continue to realize the benefits of utilizing stablecoins to manage their operations and balance sheets.
4) DeFi and general cryptocurrency usage continues to grow parabolically
While many other drivers for stablecoin growth exist that were not mentioned in this list, the four trends highlighted here will drive major expansion for stablecoin supplies over the next decade.
Tether is committed to maintaining its role at the forefront of stablecoin innovation and utilization. USD₮ is the world's most popular and widely trusted stablecoin with a total supply and value of over $83 billion.
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