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Stablecoins Hit $20B Milestone, a Nearly 300% Year-to-Date Surge

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The total value of stablecoins has now surpassed $20 billion, reflecting the growing demand of investors looking to hedge their risks in both crypto and traditional markets amid the coronavirus pandemic.

Data from Coin Metrics show that the total value of assets for all stablecoins breached the $20 billion mark Thursday, only a little more than four months after the number broke a $10-billion record in May. Stablecoins are digital tokens, the values of which are pegged to fiat currencies like U.S. dollars.

The main driver of the most recent rise is the latest downward pricing trend in non-stablecoin digital currencies such as bitcoin, according to John Todaro, director of institutional research at cryptocurrency analysis firm TradeBlock.

“Because some exchanges do not offer fiat pairs, stablecoins are the only available option for traders to move risk off into fiat-like assets during periods of volatility,” Todaro wrote in an email response to CoinDesk.

More traders and individuals view stablecoins as an intermediary step before putting money in riskier cryptocurrencies. After purchasing the stablecoins with U.S. dollars or other government-issued currencies, they can move the stablecoins to exchanges and trade for cryptocurrencies such as bitcoin, ether or others.

Data from crypto data site Glassnode show that the balance on exchanges for tether, the most popular stablecoin by market capitalization, hit its all-time high in April. The increased supply of stablecoin also caused higher liquidity in both crypto trading and transactions last week, Glassnode’s weekly report wrote on Sept. 21.

The surge of stablecoin demand may also be because of heightened interest in the decentralized finance (DeFi) sector. Stablecoins are used by DeFi users to receive high yields from a variety of DeFi platforms, such as Uniswap, Curve and Aave.

With more political uncertainty, stablecoins are also being used by individuals and corporations to “bypass capital controls and other enforcements in order to move USD-like assets around,” said Todaro.

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