Cryptocurrencies have had an exceptional year, reaching a combined value of more than $3 trillion for the first time in November. The market seems to have benefited from the public having time on their hands during pandemic lockdowns.
Also, large investment funds and banks have stepped in, not least with the recent launch of the first Bitcoin-backed exchange-traded fund – a listed fund that makes it easier for more investors to get exposure to this asset class.
Alongside this has been an explosive rise in the value of stablecoins like Tether, USD Coin and Binance USD. Like other cryptocurrencies, stablecoins move around on the same online ledger technology known as blockchains. The difference is that their value is pegged 1:1 to a financial asset outside the world of crypto, usually the American dollar.
Stablecoins enable investors to keep money in their digital wallets that is less volatile than Bitcoin, giving them one less reason to need a bank account. For a whole movement that is about a declaration of independence from banks and other centralised financial providers, stablecoins help to facilitate that. And since the rest of crypto tends to go up and down together, investors can protect themselves better in a falling market by moving money into stablecoins…