Amid the financial instability of the year, the turbulent year was a fruitful one for the stablecoin sector. From the start of 2020, cryptos that have their prices linked to real assets, such as gold or the USD, saw a strong influx of funding since traders seek to acquire stable assets as a method to prevent their cash from depreciating.
Although stablecoins became a useful store of funding that offers greater security against disruption brought by the pandemic the following economic turmoil, there is fair proof to indicate that currencies are rapidly evolving beyond their position as a trading asset and are more and more seen as a means of transferring worth.
Over the upcoming times, we are probable to witness a variety of financial entities and big companies begin to dabble in the stablecoin sphere, with multinational names like Facebook showing its intentions with Libra. With large-scale investment in stablecoins looking like a sure thing, what is that going to mean for smaller, unregulated assets like Ripple in the cryptocurrency marketplace?
Rise of the Stablecoins
Tether joined the ring as the initial stablecoin. Released in 2014, it took a few years until the US D-backed crypto began to gain widespread acceptance.
When BTC made its notorious recovery at the end of 2017, more cryptocurrency exchanges began transitioning from fiat currency-to-BTC trading pairs to Tether-to-BTC – allowing cryptocurrency-only exchanges to expand on marketplace share gains.
The late 2017 expansion jumpstarted other stablecoins in reaching to the cryptocurrency marketplace, with numerous ventures emerging in an effort to replicate Tether’s target and success.
The following year saw the arrival of many big players in the sphere of stablecoins, from USD Coin to Paxos and TrueUSD.
As the advent of the pandemic triggered wide economic confusion, the marketplace capitalization of stablecoins rose together to more than $7 billion in worth in 3 months – nearly $6 billion of Tether’s investments.
Since the spring period, the growth in DeFi protocols led to stablecoin markets swelling by even $100 million daily – leaving the sector’s marketplace cap more than doubling in size since the beginning of 2020.
In addition, more recent developments in the acceptance of stablecoin ventures by banks led to a higher level of acceptance by investors. The Lichtenstein Bank Frick stated that it would support USD Coin – enabling clients to send, get and deposit stablecoin by their bank accounts.
The quick rise of the stablecoin marketplace, combined with an ever-increasing degree of interest in blockchain tech from both financial entities and big businesses alike, means that stablecoins are likely to come out as the main type of bank coin on cryptocurrency marketplace. But what is this going to mean for digital assets like Ripple and investors looking to move their holdings in BTC to Litecoin, for example, to exploit quick transfers?
Stablecoins Entering The Cryptocurrency Marketplace
Ripple’s first years have brought wide enthusiasm to the distributed leverage tech on which the XRP coin was created.
Payments utilizing the coin were expected to be fast and free of high transaction charges ordered by some early crypto assets. The aim of the coin was on interbank payments, but its early success led Ripple to develop into the world’s leading crypto payment network.
At the height of its success, Ripple was readily accessible via top cryptocurrency exchanges, providing simple accessibility to digital finance that could readily be exchanged.
But, Ripple also inadvertently drew up a method on how to create a good stablecoin.
The introduction of stablecoins linked to different assets created to maintain their worth in the midst of economic turmoils while running on a simple transaction platform with small processing costs has put multiple stablecoins in direct rivalry with Ripple.
With the inception of other corporate-supported stablecoins such as the JPM Coin and the Utility Settlement Coin Venture, it is clear that the old XRP guard will be facing a big fight to avoid being drowned out by the market’s new upstarts.
The financial strength of corporate stablecoins means that the rapid payment structures of Ripple can soon be strengthened by new transactional innovations.
But, thanks to the durability of the coin in a fast-growing marketplace, there might be some sun on the horizon for Ripple. Ripple has served more than 300 customers in its lifetime and has a higher level of cryptocurrency expertise relative to its rivals.
It is evident that stablecoins are here for the near future and also have the ability to reinvent national fiat currencies in mainstream use. With marketplace caps growing rapidly, the old cryptocurrencies guard could be at risk of losing out as more enthusiasts seek to find practicality and stable prices inside cryptocurrency assets.
For Ripple, the idea of fighting to reclaim its position as the sector’s chosen trading coin seems too whimsical considering the financial power of these new names bringing stablecoins into the market.
Rather, what was before seen as one of the most popular cryptos on the globe would have to tap into its expertise to move away from its rapid transactional origins. The demand for cryptos is focused on natural selection, where just the most creative survives. In this unprecedented environment, lots of yesterday’s innovative cryptos would be forced to pursue new distributed leverage tech elsewhere in order to preserve their relevance to adopters.