Stablecoins Hitting $9 Billion Shows Investors in Crypto Market Are Rattled

Over the past few weeks, stablecoins, crypto-assets tied backed by a “stable” reserve asset, have become increasingly important to the cryptocurrency market. First, just assets used by the fringe, this subset of altcoins now accounts for a growing percentage of the crypto market’s value.
In fact, according to April 20th data from blockchain analytics firm Coin Metrics, the value of all stablecoins in circulation just passed over $9 billion for the first time ever. What’s especially interesting about this stat is six weeks ago, the aggregate value of all stablecoins was $6 billion.

The common narrative goes that this is decisively bullish for the crypto market, with many suggesting that the growing value of stablecoins is money being prepared to be thrust into Bitcoin, Ethereum, and other cryptocurrencies.
But, this narrative may not be 100% true, with some suggesting the demand for stablecoins is increasing for other reasons that may actually show crypto investors are rattled, or at least are not willing to buy Bitcoin at the moment.
The Rapid Surge in Stablecoins Isn’t 100% Bullish for Crypto
If you’ve perused Crypto Twitter over the past few weeks, you likely know that stablecoin issuers — like Tether, Binance, Gemini, amongst other firms — have been minting stablecoins at a rapid clip.
Case in point: just last week, there were two days in a row during which $120 million mints of USDT took place.
According to Sam Bankman-Fried, the CEO of crypto exchange FTX and Bitcoin trading fund Alameda Research, this phenomenon of the rapidly increasing stock of USDT can be attributed to three main factors:

Over-the-counter traders, “primarily from Asia,” are looking to acquire USDT. Although Bankman-Fried did not elaborate on this assertion, it is a known fact that Chinese traders use Tether’s solutions because they can’t access the crypto markets in any other way. Some have also suggested that USDT is a good way to move money around the world, even if one doesn’t want to interact with Bitcoin.
People are selling crypto-assets for USDT to “hedge positions.”
People are selling crypto-assets for USDT to “reduce risk.”

Presumably, these points apply to other crypto stablecoins that have seen rapid supply growth over the past two months.
The common theme between these three factors is that USDT may not be being used to buy Bitcoin in size at the moment.
Still Bullish for Bitcoin
Although Bankman-Fried and other market participants have this thesis, there are signs that eventually, that sell-side demand will turn into buying pressure. 
Ryan Selkis, CEO of Messari, explained that per data garnered by his company, there is now $3 billion worth of stablecoins sitting on exchanges. The fact that the stablecoins aren’t leaving the exchanges, he implied, is a sign that investors are willing to buy back into Bitcoin, eventually. Selkis elaborated:
“If investors wanted to cash out of crypto completely, they would have withdrawn funds to banks. Instead, we’ve got more dry powder held in the crypto economy than ever before.”

There's now $3 billion++ of stablecoins sitting on exchanges.
If investors wanted to cash out of crypto completely, they would have withdrawn funds to banks.
Instead, we've got more dry powder held in the crypto economy than ever before.
In both real and market cap % terms. pic.twitter.com/rCEYNqcMY0
— Ryan Selkis (@twobitidiot) April 17, 2020

Photo by Jingda Chen on Unsplash

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