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Stablecoins such as Tether (USDT) and USD Coin (USDC) have risen in popularity recently. In fact, a recent study found that the total supply of stablecoins has doubled in just less than three months driven by strong demand.
The total supply of stablecoins surged to 12 billion as of the first half of the month of July based on a recent research study by Coin Metrics, Bitcoin.com reported. This represents a hundred percent increase since March 12, when supply was only at 6 billion stablecoins.
“Stablecoin supply has exploded in 2020 but it’s unclear exactly why,” Coin Metrics noted in the research study, which is sponsored by Bitstamp. “After it took 5 years for stablecoin supply to reach 6 billion, it only took another 4 months for it to grow from 6 billion to 12 billion following the March 12th crypto crash.”
But prior to this spectacular doubling of stablecoins supply in just less than four months, it took five years for the supply to reach 6 billion tokens. The recent spike in demand only started this year when global equity markets crashed in March.
With the uncertainty brought by the coronavirus pandemic, investors unloaded their stock holdings causing the crash. Some investors decided to park their funds into the cryptocurrency market.
The massive selloff of equity created a shortage of dollars. Some of the crypto investors who could not cash out turned to stablecoins, which spiked the demand of the tokens.
“Moving into stablecoins allows investors to effectively keep money parked on the sideline without having to completely cash out into fiat currency and incurring fees,” the research noted. “This rush to safety likely accounted for a significant portion of the increased stablecoin demand following March 12th.”
Based on the data, “over 800 million new USDT_ETH were issued” within two weeks of the crash. For comparison, only about 740 million USDT_ETH were issued from January 1 to March 11.
The study also noted that USDT_TRX, another popular stablecoin, increased its supply by over 2 billion tokens by the end of June. Other stablecoins’ supplies increased as well but only to a few hundred million coins.
