In the currently booming crypto market, Stablecoins are unquestionably playing an increasingly important role. The boom in the industry can be attributed, in large part, to the fact that it enables the plugging of the world’s demand for dollars. Stablecoins provide a variety of features that save cost and also ease accessibility.
Stablecoins as collateral for Bitcoin futures
The stablecoin supply, in January 2021, stood at over $27 billion. By the end of 2021, the supply of stable coins has witnessed a 400% growth and now stands at $140 billion.
Stablecoin’s growth, in addition to providing easy accessibility to the dollar, is due to its rising use in Bitcoin trading. Stablecoins provide crypto traders the option of availing borrowings against their holdings of digital assets.
An analysis of data sourced from Glassnode reveals that there has been a large drop in the margins used by traders in the bitcoin futures market. According to data, as of April 2021, the drop was by about 70%. The current level is estimated at 45%. This drop has come about because now traders do not have to be concerned about a market fall since their assets have been collateralized through Stablecoins.
This surge in Stablecoin usage has attracted the attention of regulators. They are now looking to monitor the operations of the Stablecoin issuers to safeguard the interests of the investors. A recent US Treasury report highlighted that stable coins should also be regulated like banks. If this comes about, Stablecoins would be the first crypto asset to be regulated – giving the regulators an opportunity to get a grip on regulating the crypto space.
