In May 2021, USDT printed 11 billion banknotes, while in May 2020 the figure was only 2.5 billion, a year-on-year increase of 440%; USDC printed 8.3 billion new banknotes in May, and the figure was 13 million in May 2020 Pieces, a year-on-year increase of 63800%.

Obviously, the issuance of US dollar stablecoins has entered exponential growth.

So what are the factors that are driving the rapid expansion of the US dollar stablecoin? What impact will the rapid expansion of USD stablecoins have on the crypto market?

1. The development of USD stablecoins has officially entered the era of “exponential growth”

The issuance of US dollar stablecoins has entered “exponential growth”. Let’s look at two sets of analysis data.

According to the latest data from Coingecko, on May 3, 2020, the issuance of USD stable currency USDT was about 6.41 billion U.S. dollars. One year later, on June 2, 2021, the USDT issuance had exploded to an astonishing 61.77 billion U.S. dollars. The annual growth rate is 1120%.

The growth rate of the US dollar stablecoin USDC is also amazing.

On May 3, 2020, the USDC issuance volume was approximately US$700 million. On June 2, 2021, the USDC issuance volume has exploded to an astonishing US$22.75 billion, an increase of 2250% in a year.

From this point of view, the development of stablecoins has indeed entered an “exponential” era, and the growth rate of USDC has far surpassed that of USDT.

The actual situation is that the growth rate of USDC almost far exceeds that of all stable currencies except Dai, which includes USDT, UST, TUSD, PAX, etc.

So, what contributed to this result?

2. The driving factors for the “exponential growth” of the US dollar stablecoin

There are many reasons to promote the outbreak of the US dollar stablecoin, which can be summed up in three points: 1) higher-level regular troops enter the market, and the time to “lift the table” is approaching; 2) the promotion of the civilianization of cryptocurrency; 3) decentralization The promotion of financial innovation.

First, let’s look at the regular army’s approach, and the time for accelerating the “turning the table” comes.

The so-called lift table refers to the USD credit stable currency issued by formal institutions, represented by USDC, whose market value surpasses USDT. USDT issuance volume is 61.77 billion U.S. dollars, USDC issuance volume is 22.75 billion U.S. dollars.

At present, the global stable currency market is still dominated by USDT, but the US dollar stable currency USDC jointly established by Circle and Coinbase is regarded as an alternative to USDT.

At the end of May, USDC issuer Circle announced that it has completed a large-scale financing and raised US$440 million. Investment institutions include Fidelity, Digital Currency Group, cryptocurrency derivatives exchange FTX, Breyer Capital, Valor Capital, etc. .

Among them, whether Fidelity or Digital Currency Group, there are traditional financial forces behind them. The entry of high-level financial institutions has also accelerated the process of “turning the table” of the second stable currency, USDC, and also accelerated the market value of stable currency. The expansion process.

JPMorgan Chase’s evaluation of USDT may also intensify this process.

On May 18, Josh Younger of JPMorgan Chase released a new report on stablecoins and their interaction with the commercial paper market, arguing that Tether has and will continue to face difficulties in entering the domestic banking system.

The report believes that there are three specific reasons. First, their assets may be overseas, not necessarily in the Bahamas. Secondly, OCC’s recent guidance authorizes domestic banks under its supervision to accept stablecoin issuers’ deposits (and other requirements) only if these tokens are fully retained. Tether has admitted that it has recently settled with the NYAG office. There are false statements and violations of regulations. Finally, these recognitions and other concerns may trigger reputational risk concerns for large domestic banks because they can accommodate a significant portion of these reserve assets.

Higher-level institutions are joining the discourse control over the US dollar stablecoin.

Secondly, the process of civilianization of cryptocurrency is also a prerequisite for the excessive issuance of stablecoins.

According to a report released by Gemini on April 21 this year, 14% of Americans are now crypto investors. This means that 21.2 million American adults own cryptocurrency, and other studies estimate that this number is even higher.

At the same time, the cryptocurrency deposits reported by the UK payment app STICPAY posted a 48% increase in cryptocurrency deposits in the first quarter of this year, while legal deposits remained unchanged. The report shows that compared with the same period last year, the number of STICPAY users who converted fiat currencies into cryptocurrencies increased by 185%, while the number of users who converted cryptocurrencies back into fiat currencies decreased by 12%.

The crypto market is developing at an alarming rate, which directly promotes the prosperity and development of the stablecoin market.

In fact, despite the recent weakening of the crypto bull market, the speed of stable currency issuance has not stopped. On the contrary, the issuance of USDT and USDC has entered a stage of rapid growth. Take USDC as an example. On May 22, four days later, USDC alone issued 5 billion more.

Finally, it is the promotion of decentralized financial innovation.

In March 2020, Makerdao decided to add the stable currency USDC as DeFi collateral. At present, about 38% of DAI has been issued by USDC as collateral. According to DAI’s current market value of 4.65 billion US dollars, the amount of USDC pledged in Makerdao alone is as high as 1.8 billion US dollars, accounting for 7.9% of the total USDC issuance.

So, what impact will such a sufficient number of stablecoins have on the crypto market?

3. The financial market is booming, based on the proliferation of legal currency, and so is the crypto market

When we ask “How does the proliferation of US dollar stablecoins affect the crypto market”, let’s first ask “How does the proliferation of US dollars affect the U.S. stock market”.

What has driven the ten-year bull market in US stocks? The answer is obvious: sufficient dollar liquidity.

Since 2008, the Federal Reserve has implemented 4 rounds of QE, namely quantitative easing, and has input 10 trillions of currency into the capital market. As a result, it has directly promoted the 10 years including the Nasdaq Index, the Dow Jones Industrial Index, and the S&P 500. Big bull market.

The financial market is booming and based on the proliferation of legal currencies, the crypto market will inevitably follow such laws. However, in the ebb and flow of the financial market reshuffle, the crypto market may also be hit hard, but behind the ups and downs of the K-line, what remains unchanged is that the BTC price is steadily advancing following the trajectory of S2F.

Therefore, even if the crypto market has experienced the violent washing of 519, this will not change the powerful self-repair ability of Bitcoin, which is a kind of “robustness” that makes any financial asset in the world ashamed.