Over $1B issued in 6 months - Why does that matter?
|Aug 9||Public post|
Last week, USD Coin, also known as USDC - the stablecoin issued jointly by Coinbase and Circle, became the first stablecoin to have more than $1B in assets issued in under a year.
In fact, it took the stablecoin only 10 months to reach the $1B mark, with $600M in USDC redemption, and $430M in active circulation - but, perhaps more interestingly in that same time frame USDC has been responsible for more than $16B in transfers.
Why Does This Matter?
Stablecoin competitor, Tether (USDT), took more than 18 months to reach these performance levels despite it being, at the time, the only stablecoin, run by a world leading exchange, and capturing the Asian market.
While Tether is now hotly contested due to its high-risk battle with the New York Supreme Court and constantly swirling questions about their solvency, there are dozens of other stablecoins without the bad wrap.
There is True USD, Gemini Dollar, Paxos, DAI, bitUSD and sUSD.
Given all the options on the table, how could a new project deliver $1B in growth in 11 months?
The simple answer is, that institutional money was sitting on the sidelines. A lot of it still is.
While many institutions are railing against Bitcoin, they are watching it with an eager eye, hungry to take part in a new asset class.
The challenge is, in most Western countries - they can’t.
Banks, hedge funds, pension funds and money managers can’t simply pour their money into BitFinex or Binance.
Instead, they need custodial accounts, that comply with US financial regulation and provide insurable deposits. Which is exactly what Coinbase and Circle, the two US regulated financial entities behind USDC, have been able to provide.
Consumers had plenty of options, there was no need to wait for USDC. Institutions however, had their hands tied. So the rapid pace of entry into the USDC market shows that the same institutions who have been calling Bitcoin a scam, with hopes of suppressing prices, are the same ones buying into that market.
The total marketcap of Bitcoin at the time of writing this piece is roughly $209B USD - so a measly $1B in assets doesn’t matter here, right?
First, we have to remove the amount of Bitcoin that is considered lost. For that metric we commonly use Bitcoin assets in wallets that haven’t had transactions in 5+ years
This represents 3,847,859 BTC, or $45,075,013,162.
Brining our marketcap of accessible assets down to $164B. Plus, it’s estimated that the ‘real liquidation point’ (the amount of raw money that has been put into the system to buy Bitcoin) is roughly 10% of the cash value of the system. That is to say, if you tried to sell every last Bitcoin, you’d end up with only 10% of the marketcap in cash.
That puts the cash value of the marketcap at $16.4B, of which USDC assets were $1B.
This means that within just 11 months since launch, the USDC, project increased the value of Bitcoin’s 10-year old financial system by 6.10%
This shows the sheer buying power of institutional money, and how early stage Bitcoin investors are right now.
While we may be “crossing-the-chasm” when it comes to individual investors, we are still extremely early stage as far as institutional investment goes, and USDC proves that institutions are hungrily waiting on the sidelines to take a bite out of the crypto industry.
This article is part of Coffee&Coin, a free weekly newsletter about the blockchain industry. Coffee&Coin focuses on providing editorial commentary on economic, political, legal and technology news related to blockchain technology and cryptocurrency.
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