24 Oct 2022 Samantha McLauren
Stablecoins Explode In Popularity Amid Stagnation In The Crypto Sector
Stablecoins seem to have created their own sub-sector within the world of cryptos, as the fiat-pegged cryptos are bracing themselves for a second episode of the “Great Stablecoin War”, according to FTX CEO Sam Bankman-Fried.
Bankman-Fried noted that Binance could be the main culprit for starting the war, as the exchange decided to auto-convert all supported stablecoins into its native BinanceUSD (BUSD) stablecoin, starting September 6. The move by Binance quickly pushed BUSD’s popularity, while rising the share of the total stablecoin market from 10.01% on Sept. 7 to 15.48% on Oct. 22, data from Coin Metrics suggests.
The move also reaffirmed BUSD’s third position in the stablecoin rankings (7th overall), trailing behind only Tether (USDT) and USD Coin (USDC). Meanwhile, Bankman-Fried reminded that the first stablecoin war was in 2018, with only USDT and USDC managing to survive without noticeable damage during the ICO winter of 2018.
However, despite USDT losing almost half of its dominance in the stablecoin sub-sector and USDC expanding its market share from 10% to 32% in just a couple of years, it is BUSD that recorded a 30-fold market cap increase in the same period.
Binance gets ready for action
The auto-conversion feature of Binance’s exchange platform is just the tip of the iceberg when it comes to expanding the presence of its native stablecoin. Binance actually forced its users to go the auto-conversion route by announcing it would stop support for a long list of spot trading asset pairs for USDC, USDP Stablecoin (USDP), and TrueUSD (TUSD). Any users still holding the three stablecoins by Sept. 29 witnessed their holdings being auto-converted to BUSD at a 1:1 ratio.
However, the exchange still proceeds with caution for auto-converting Tether (USDT) tokens, leaving the door open for Tether owners.
Meanwhile, Bankman-Fried stressed that since BUSD would spark a stablecoin war with the other two big players, there will likely be more projects sprouting up in the “non-fiat-backed-stablecoin space”.
“It’ll be interesting to see what emerges from the post-Luna and post-DAI-holding-USDC. My guess is that it will be something interest-bearing or otherwise with some upside,” the FTX CEO added.
What about the overall crypto sector?
The increase in popularity for stablecoins didn’t affect the performance of other coins and tokens, as the crypto sector is in a sideways momentum. Indeed, the crypto sector recorded the least volatile “Uptober”, with most of the cryptos trading in a very narrow price corridor. Interestingly, some analysts are considering the crypto sector to be a big stablecoin in its function. However, the crypto sector still has some interesting events happening, despite the sideways action.
Firstly, Bitcoin managed to record its highest weekly close since early September, as data from TradingView shows that the world’s largest crypto saw its largest “green” hourly candle in days before topping out at $19,700.
Founder and CEO of trading firm Eight Michaël van de Poppe commented that Bitcoin is set to stop its sideways motion.
“Coming week is a large one with all the events, which almost makes it inevitable that we’ll break out of the range. I’m watching this final resistance. It needs to break, and then, the party can start.” Van de Poppe added.
Secondly, the crypto sector may receive a welcoming push as most of the world’s financial authorities may stop making interest hikes, which further stresses the sector. However, the release of the United States Personal Consumption Expenditures (PCE) Index for September, may turn pivotal for interest rate hikes, as they are decided on factors like PCE and CPI.Bitcoin Tether btc cryptocurrencies cryptocurrency news crypto news Crypto Price Stablecoins USDT USDC BUSD