May 15, 2020 11:30 PM | Ada Wu

Since the birth of Bitcoin, the idea of decentralized cryptocurrencies circulating and replacing fiat currencies has remained a dream. High volatility and a difficult user experience help explain why no cryptocurrency has seen real mainstream use just yet. The emergence of stablecoins addressed at least one of those problems (volatility), and they’ve been widely embraced in the crypto community.

Recently, stablecoins have seen explosive growth and became a rare "beneficiary" of the COVID-19 pandemic.

But how exactly have stablecoins benefitted? Does this mean that the stablecoin has been accepted by the mainstream, or does it simply signify a short-term safe-haven for some international capital? Let’s take a look at the data.

Total stablecoin supply soars in March


As shown in the chart above, since the beginning of March, the supply of USDT, USDC, Pax USD and BUSD increased sharply, especially when New York, California and Illinois (together accounting for over 25% of the US GDP) announced a complete shutdown in response to the epidemic in mid-March.

Among them, Tether and USDC are pegged to the USD, and their growing supply via additional issuance is obvious. As of April 29, Tether had issued an additional $1.7 billion USDT since March, and its market cap soared 37%. In addition to the widespread speculation that such growth was triggered by the shortly-rebounded Bitcoin prices, the COVID-19 pandemic could also be a reason for this breakout in the stablecoin’s market cap.

Continued premium of USDT

Excepting the period around the US interest rate cut, Tether’s price has tended to be higher than its USD peg for much of the pandemic. 


The chart above shows that USDT has been trading above $1 at many points beginning in March, even as traditional indexes like the S&P 500, Dow Jones and NASDAQ fluctuated. In March, Tether traded on the Kraken exchange at an average price of 1.005 US dollars; the price throughout March was higher than 1 dollar, except for March 16 when the Federal Reserve announced the rate cut and the USDT trade closed below 1 US dollar. 

For example, on March 15, Tether’s premium on Kraken peaked at 29.1%, which is a record high in the past six months.



At the same time, comparing the above US dollar index and Tether’s price curve, we can see that the US dollar index and Tether’s price both significantly decreased and rebounded around March 15, showing a partial correlation.

It is hard to say whether a stablecoin pegged to the US dollar is really benefiting from the short supply of USD. However, given the growing international demand for US dollars in March (especially from Japan and Brazil), and the increasing access difficulties, we can speculate: due to the easy-to-access and high liquidity, USDT could have become an alternative investment tool for some investors in emerging markets trying to buy US dollars. 

The number of stablecoins stored in exchanges hits new high

Since March 1, the stablecoin balances on various exchanges have repeatedly hit new highs, according to data from TokenAnalyst.


Tether’s growing issuance certainly suggests it is confident in market demand. However, it is still difficult to judge. Is this short-term demand for stablecoins that may fade out after the epidemic? Or is it actual demand that reflects a growing mainstream acceptance of cryptocurrencies? The TokenAnalyst data suggests most investors are choosing to store stablecoins in their exchange wallets, at least for the moment.

According to Coin Metrics, the total amount of stablecoins transferred on-chain has gradually increased since 2018. Investors are now trading stablecoins more than they are Ethereum. 

Why? Stablecoins provide a relatively safe ‘parking space’ when compared to other cryptocurrencies, and can be quickly converted into a coin like BTC when investors want to play the market again. 

Looking at the fluctuations in Bitcoin’s price in March, and the growing amount of stablecoins being transferred, can we conclude that some investors are converting their Bitcoin holdings to stablecoins? More importantly, is the growth in exchange holdings of stablecoins evidence that investors plan to return to Bitcoin once things have settled down rather than cashing out? 

It’s possible, but it’s far too soon to be certain.

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