The stablecoin market is seeing some jostling around. Nevertheless, in spite of moves amoung certain coins, we are seeing expansive moves. This is something that is not surprising and everyone should count on continuing.
With all the talk about Central Bank Digital Currencies (CDBCs), we need to keep in mind a couple of factors. They are:
Here are the advantages stablecoins have:
While there is planning, design, and a look towards the future by those behind CBDCs, stablecoins are already in operation. The fact that people are starting to build around them provides an enormous leg up when it comes to this "arms" race.
Recent analysis reveals that Tether is now crossing the $80 billion level in market capitalization. This is the largest stablecoin by this metric. As we can see from the chart, this experienced a massive gain as capital flowed into this coin.
The losers were BUSD and USDC. They both saw drops to levels not seen in more than a year.
BUSD:
USDC:
We are looking at an overall market cap of $132 billion for all stablecoins. This shows us how large the market it. Yet, in spite of that impressive number, it is still a drop in the bucket.
In the past we discussed the idea of low hanging fruit. This is the payment system that is done in cash. We have billions of people around the world who operate on this basis since the combination of their local banking system along with the native currency makes for an unreliable experience. In other words, these people would prefer to deal in the cash version of the USD or EUR.
How much does this total and how does it compare to the total stablecoin market cap?
When we look at the numbers, this is what we see:
EURO:
This is just shy of $1.7 trillion.
USD:
The USD adds another $2.3 trillion to the pile. This means that we have roughly $4 trillion between the two top currencies, in banknote value alone.
This shows how small the stablecoin market truly is.
The top stablecoins listed in this article are all asset backed. They have reserves of USD, either in cash or Treasury bills. We see the idea is to have a 1:1 ratio between the stablecoin and USD holdings.
Here is the first challenge we encounter. This is not adding to the monetary system which is presently suffering a shortage, especially of US dollars. It is a situation that is playing out via liquidity issues globally.
Since a stablecoin is created only by the acceptance of a dollar, this means we are dealing with simply currency transformation. The amount of currency is not growing, hence not able to foster economic growth globally.
The Hive Backed Dollar (HBD) does not have this limitation. Instead, it is backed by the market capitalization of $HIVE, requiring no USD in the process. The market will determine how much HBD is required.
As we can see, the low hanging fruit, i.e. cash distribution and transactions made using this mechanism, is right there for the taking. Central banks are focused upon this segment of the market. We can already see the impact we can make in countries such as Venezuela and Cuba. The stablecoin has to ability to provide access to a USD denominated asset without having to get a hold of dollars.
At this point, HBD talking in millions whereas we are dealing with a market that operates in trillions. Here is where we see enormous potential for growth.
Algorithmic stablecoins are going to have a rocky future. They are targets by the existing power brokers who want to maintain control. This means we can expect regulation to outlaw them, making direct accessibility from fiat currency difficult.
That said, we are going to witness a transformation. What most overlook is the fact that cryptocurrency will gain value in a way most do not expect. Since the primary focus is monetary, many believe the only way for the value to increase is for fiat to roll in. This certainly can send markets flying yet is not the path that will unfold.
Instead, we will see adoption as the driving force. Since tokenization will apply, at some point, to most digital activities, we are going to see social media, gaming, and online communication all filled with cryptocurrency. This means that its is impact by the network effect.
Here is where the change will start to take place. As a coin such as $HIVE grows in value, the stablecoin tied to it can have a much larger market capitalization. This coin operates under a haircut rule meaning it is stifled by its relation to $HIVE. Unless it is below the threshold, no more HBD can be created.
The digital world is near infinite. Each day, it gets larger. People seem to believe in a time when we were dealing mostly with physical currency purchasing goods and service operating in the same realm.
Today, we have a digital economy that is exploding. There are products such as music or video that is only constrained by bandwidth. The number of versions of a digital song is unlimited. If the bandwidth allowed, a song could be purchased and downloaded 15 trillion times.
We are entering a realm where abundance is the norm. This is going to require capital to ensure expansion can keep occurring. It is a point missed by those at central banks and in politics. They still are running the old models.
This means they are going to continually to underestimate what is needed.
Hive can take advantage of this. Like all blockchains and cryptocurrencies, this was founded in the digital realm. It never operated in the physical. Here we see a major advantage.
The scalability of the Hive Backed Dollar, in terms of units, is unmatched. The only variable is the market capitalization of $HIVE. This is something that can be driven by the network effect, a concept that exploded with digitization.
As the base layer scales, we can see more transaction capability. All of this ties into the virtual realm where limitations based upon atoms is removed. The physical is much harder to scale than the digital.
CBDCs are a number of years out. In the meantime, Hive is building the foundation in the wild. The system is being tested on a daily basis, with everything running on a mainnet. This is not a testing center or something that is being theorized.
A base layer stablecoin is the ideal solution to a growing market. This is offering unique features that are not matched even by the market leaders.
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