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Stablecoins are becoming increasingly important for the Bitcoin economy

The following is from a recent issue of Deep Dive, Bitcoin Magazine’s premium market newsletter. To be among the first to get this insight and other Bitcoin market analysis delivered to your inbox, sign up now.

One of the main economic discussions this year, aside from Bitcoin, revolves around the rise in stablecoins and, more specifically, the rise in stablecoins, which are pegged to the US dollar. As the world reserve currency, everyone around the world demands US dollars. Stablecoins can help meet this demand by enhancing the capabilities of the US dollar in terms of accessibility and efficiency.

2021 was a year of transformation for the total supply of USD stablecoins in the market with a total supply of nearly $ 140 billion. That’s 401% year-to-date growth on circulating supply of just $ 27.67 billion in January.

Stablecoins have become a bigger and bigger part of the bitcoin / cryptocurrency economy, doing everything from providing dollar on / off ramps for offshore exchanges to allowing traders / speculators to borrow against their assets.

It is only since April that the type of margin used in the Bitcoin futures / derivatives market has dropped from 70% to around 45%, which means that bullish traders / speculators increasingly no longer have to worry about a falling collateral value when the market is facing a downturn.

The type of margin used in the Bitcoin futures / derivatives market has decreased significantly.

There is currently $ 7.21 billion in open Bitcoin futures backed by stablecoins.

As a growing part of the Bitcoin economy, stablecoins secure $ 7.21 billion in open interest for Bitcoin futures.

Open interest for Bitcoin futures, secured by stablecoins.

The exponential growth of stablecoins comes as the US holds Congressional hearings on “digital assets” and stablecoins. One clip from the hearing stood out in particular:

The clip discussed how the growth of stablecoins in the crypto industry is actually strengthening the dollar as the world reserve currency and increasing the demand for dollars. This seems to be the case empirically.

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