The Role of Stablecoins
Stablecoins act as a bridge between fiat currencies and cryptocurrencies, enabling smooth capital transfers between sectors. In previous market cycles, the rise in stablecoin capitalization reliably signaled Bitcoin’s upcoming price surge. Investors would bring in fiat, indicating intentions to buy crypto. However, since March, this trend has reversed.
Impact of Spot ETFs
One reason for this shift is the launch of spot ETFs this year. Both institutional and retail investors can now invest in crypto without needing exchanges or stablecoins. This year, Bitcoin-ETFs have attracted $18.8 billion in investments, bypassing the need for stablecoins.
Stablecoins as Independent Assets
Another factor is the growing demand for stablecoins as independent assets. This trend is especially visible in Latin America, where inflation rates have reached double or even triple digits in some countries. Over the past year, the region has received $415 billion in crypto transactions, accounting for 9.1% of the global volume.
Argentina leads this surge, with $91.1 billion in cryptocurrency inflows and a staggering 214% inflation rate. As stablecoins gain popularity, they are increasingly used for savings and payments, not just for crypto trades.
Conclusion: Stablecoin Growth Drivers
Stablecoin capitalization growth this year stems primarily from demand for them as stand-alone assets. Previously, they were mainly bought for trading on crypto exchanges. Supporting this conclusion is the decline in trading volume on both spot and derivatives markets since March. If stablecoins were still used mainly for trading, their capitalization would have decreased as well.
Additionally, issuers have shown increased interest in Latin America. For example, in May, Circle officially launched USDC in Brazil in partnership with BTG Pactual and Nubank, offering direct access to USDC for institutional and retail clients.