Mysterious Stablecoin Rally Marked With Regional Differences
Strong and unexplained worldwide growth in the use of stablecoins following crypto’s Black Thursday on March 12 is also marked with certain regional differences.
The combined market capitalization of all stablecoins has “almost doubled” since the market crash in March, despite an initially sharp reduction in market capitalization for other cryptoassets.
“As of May 7th, the aggregate stablecoin market cap has grown to over USD 10B,” crypto market analysis firm Coin Metrics said in their latest report.
While others speculate that this growth has been fueled by traders looking to ensure they have the “dry powder” they need to take advantage of new buying opportunities in the market, or that it could be related to a broader shortage of US dollars outside of the US and a “rush to safety,” Coin Metrics stressed that the exact cause of the surge is still unknown.
However, the researchers noted that stablecoin, which is “a crucial part of the crypto ecosystem,” transfer patterns show that different stablecoins are potentially being used for different purposes, and are favored in different parts of the world.
The report noted that tether (USDT) – the most popular stablecoin today – is seeing far more transactions made during typical Asian and European trading hours, compared to the activity during North American trading hours.
“USDT-ETH has a clear pattern of heavy usage from about 2:00 to 16:00 UTC which corresponds with the hours that Asian and European stock markets are open,” the report said, while adding that “transfers go dark towards the end of the day – there are very few transfers after 20:00, which is when the New York Stock Exchange closes.”
To perform the analysis, Coin Metrics looked specifically at USDT issued on the Ethereum network as ERC-20 tokens (tether tokens are also available on Bitcoin Cash (BCH), EOS, Tron (TRX), and other networks).
Looking at the activity of other stablecoins also supported the same conclusion, with paxos standard token (PAX) in particular standing out with a new all-time high of 24,000 transactions recorded in one day on May 5. Unlike tether, however, the use of paxos appears to be more spread out during the day, suggesting that paxos may be gaining more “non-institutional, global usage,” according to Coin Metrics.
Following the uptick in activity on paxos, the stablecoin has now surpassed both the Coinbase-backed USD Coin (USDC) and the decentralized alternative DAI in terms of daily transfer count, the report also said.
The findings support the theory that tether, in particular, is used extensively by Asian traders, and to a much lesser extent in North America. This is also in line with previous reports on the use of tether that revealed how the stablecoin fuels much of the OTC (over-the-counter) trading that goes on in China in particular.
In conclusion, the report noted that the differences in regional usage of the various stablecoins indicates that they are being used “for different purposes” around the world, and that USDT and USDC remains most used in Asia, while PAX seems to have a more global appeal. DAI, however, appears to be mostly used by North American traders for now, the report concluded.