Recent developments indicate major shifts may be ahead in the cryptocurrency market, with the importance of stablecoin growing, PayPal rumored to announce a partnership with Paxos to offer crypto trading, and Mastercard expanding its own cryptocurrency program.
In an economy still reeling from the impact of the COVID-19 pandemic, replete with lockdowns, shifts to telecommuting and business closures, cryptocurrency trading is becoming an attractive alternative to many businesses and investors alike.
With recent moves to introduce or expand crypto-based services by more established and commonly-used payment providers, a mainstream adoption of digital currencies may not be far off. Here is what you need to know about it.
Recently, stability has increased as a factor of importance in the cryptocurrency market.
After the massive value growth of cryptocurrencies throughout 2017 and the subsequent bursting of the bubble in early 2018, the market see-sawed until the beginning of 2020. Just when it seemed another growth spike was taking off, the pandemic stock market crash sent it tumbling again. Since April, crypto values have roughly returned to February levels.
Throughout this period, one sector of the cryptocurrency market has outpaced the others in terms of growth – stablecoins.
Unlike currencies whose value is volatile and driven by supply and demand, stablecoins are typically bound to a fiat currency, although some are pegged against other cryptocurrencies. Prominent examples of stablecoins include Tether (USDT), USD Coin (USDC), or Binance USD (BUSD), all equivalent to $1.
Stablecoins have been on the rise, measured by market cap and transaction volume, since the 2018 crash. This indicates their buyers value both their innate crypto advantages and the much lower volatility of fiat currency. It also suggests the use of cryptocurrency as a vehicle for speculation is now giving way to actual use for transfers and longer-term holding.
In the tailwind of the crisis, many of these stablecoins have been doing well.
For example, immediately after the stock crash in March, Tether’s daily transaction volume shot up from around $50 billion to nearly $100 billion. This spike was fueled by buyers converting both from USD and other cryptocurrencies, leading the currency issuers to make several billion new USDT available, for a total market cap now exceeding $10 billion. Now, as the volatile currencies are approaching pre-crisis values, USDT transaction volumes are sinking again.
Though official confirmation is still lacking, it has emerged that payment processor PayPal (NASDAQ: PYPL), with its mobile payments division Venmo, is now set on breaking into the cryptocurrency market.
A letter from PayPal to the European Commission, leaked earlier this week, shows that the payment provider was working on crypto capabilities even before March.
Now, it seems, the process is coming to fruition, with an announcement by PayPal expected as…