Stablecoin Money Markets Attract Capital as Bitcoin Corrects

[Mercury]

The cryptocurrency market has tanked alongside legacy financial markets as the looming threat of a Coronavirus pandemic pushes many investors towards capitulation. With money moving out of speculative assets on a global scale, stablecoins have seen strong traction in the crypto market.

Stablecoins Roaring in the Face of the Bear

Over the last few months, the stablecoin market has proved its mettle as a reliable hedge into dollars without exiting the cryptocurrency ecosystem.

Tether (USDT), the most liquid stablecoin, is the primary form of cash for cryptocurrency investors. $300 million worth of USDT was recently migrated from TRON to Ethereum as more DeFi projects integrated the genesis stablecoin.

USDT transaction volume on Ethereum. Source: Santiment

DAI, a permissionless stablecoin issued by MakerDAO, is the primary stablecoin in DeFi along with USDC. The latest market correction resulted in a surge in DAI transaction volume.

DAI transactions volume. Source: Santiment

Curve Finance, a stablecoin swapping protocol, is helping investors move from one stablecoin to another without losing much value during the trade. As an aside, this loss of value is referred to as slippage.

From there, newly-arrived stablecoin investors can put their holdings to work immediately by using iEarn Finance.

iEarn is a yield aggregator launched by Andre Cronje and Anton Nell. They built several sub-products on iEarn, including yTokens and a “meta-stablecoin” that earn interest through iEarn.

On Mar. 9, 2020, the Curve pool, called yCurve pool, consisting of yToken-versions of all major stablecoins had $5.39 million of volume, helping Curve hit its all-time high in volume at $7.3 million.

Curve Finance pool volumes. Source: DuneAnalytics

In the yCurve pool, $1.81 million, $2.05 million, and $1.52 million of volume accrued to USDT, USDC, and DAI, respectively.

Liquidity is still at its all-time high in the yCurve pool, which also points toward investors allocating capital to what is DeFi’s most efficient yield-bearing capital pool.

But does this mean investors are moving from speculative assets to crypto money markets?

Compound, another crypto-native money market, has seen a net outflow since the end of February 2020, indicating that money markets are not immune to systemic fear. This dynamic has been observed in the traditional financial market as companies reduce their spending and borrowing in times of economic uncertainty.

Source: DeFi Pulse

Stablecoins are an undoubted winner in this scenario.

The S&P 500 fell approximately 7.6% on Mar. 9, dragging gold and treasury indexes down with it towards the end of the day. This is a signal that fear is hitting the markets hard, causing investors to sell their assets and hoard cash.

By virtue, stablecoins are the cash of crypto markets. And as crypto markets fall, stablecoin volume is also rising.

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