As a seasoned researcher with over two decades of experience in the financial industry, I have witnessed the evolution of digital currencies from a niche concept to a global phenomenon that is reshaping the world economy. The third quarter of 2024 has been particularly intriguing, with stablecoins reaching unprecedented heights and gaining widespread acceptance.
2024’s third quarter marked an increase in the utilization and acceptance of stablecoins, as indicated by Coinbase’s Fourth Quarter Report on Cryptocurrency Markets, in collaboration with Glassnode.
In the third quarter of 2024, the total market value of Stablecoins reached an unprecedented peak of close to $170 billion, as per a recent report. This surge coincided with the European Union enacting their new Crypto-Assets Market regulation, which brought clarity to the way stablecoins are managed and operated.
Stablecoins have become a key tool for users seeking faster, cheaper, and more secure transactions. Their utility in payment systems, including remittances and cross-border transfers, has continued to expand.
Lately, Anthony Pompliano has proposed that technological advancements beyond cryptocurrency might pave the way for a future where stablecoins take center stage as the preferred method of transaction in an economy dominated by machines. The expanding usage of stablecoins, both in crypto trading and traditional finance, underscores this trend.
Based on the latest findings, it appears that the total amount of transactions involving stablecoins has almost hit $20 trillion so far this year, up to the third quarter. This suggests an expanding influence of stablecoins within the worldwide economic landscape.
Stablecoin and Bitcoin dominance
In the third quarter, I observed a surge in the influence of stablecoins, parallel to Bitcoin (BTC). This trend seemed to reflect a preference among crypto investors for what they perceive as the most superior digital assets, indicating a growing interest in quality and stability within the cryptocurrency market.
According to the report, the present Bitcoin cycle appears to be mirroring both the 2015-2018 and 2018-2022 cycles, with each cycle ending in approximately 2,000% and 600% growth, respectively.
What is MiCA?
The European Union introduced a broad regulatory structure called the Crypto-Assets Market Regulation in June 2023. This regulation aims to govern the crypto industry within its 27 member states. It sets a 12-18 month timeframe for implementing rules on various aspects, such as preventing money laundering, countering terrorist financing, and safekeeping digital assets, among others.
The influence of MiCA on stablecoins is yet to be fully understood, but Tether’s CEO, Paolo Ardoino, has voiced worry about the 60% cash reserve requirement for stablecoins under MiCA. He contends that these regulations could amplify liquidity problems during mass redemptions, possibly triggering bank failures in Europe due to potential strain on their resources.
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2024-10-16 04:40