The Stablecoin Wars

There are three dominant monies in cryptocurrency: Bitcoin (BTC), Ether (ETH), and the United States Dollar (USD). However, it's the USD that is the fastest growing medium of exchange (MoE) of the three. Long thought of as the holy grail of cryptocurrencies, stablecoins have exploded in recent months, importing USD into the digital frontier. At their current rate of growth, stablecoins may soon eclipse every other asset on public blockchains in daily value transfers.

Yet, the above does not tell the full story of stablecoins. Stablecoins are not just one monolithic block. A slew of organizations are eager to cash in on what is shaping up to be one of the biggest near term opportunities for mainstream cryptocurrency adoption. This is one of those few addressable markets in crypto where trillions of dollars are actually at stake.

The Stablecoin Wars

Competition in the stablecoin market kicked into high gear this year as the coronavirus sparked a global flight to dollars. Stablecoins’ monetary base has grown nearly $4 billion year-to-date, and the spoils have been split unevenly. The largest winners of 2020 so far have been BUSD, USDC, and USDT, while the largest losers have been PAX and TUSD.

BUSD started off the year as one of the smallest stablecoins on the market with just $31 million issued in its first three months in existence. Like it’s competitors, BUSD’s issuance picked up substantially as coronavirus induced volatility kicked in. Yet, BUSD benefited disproportionately from the upswing in stablecoin issuance due to Binance’s on-going fee promotion that incentivized BUSD liquidity providers. The promotion was originally scheduled to end Jan. 1, 2020, but has since been extended three times and is currently set to continue until Jun. 6, 2020. The promotion has been an excellent means of bootstrapping liquidity for BUSD, which has vaulted into the top four stablecoins by market capitalization. It’s not a mistake Binance keeps extending its promotion.