It has become a routine to see a crypto market crash every now and then. Thanks to many events that happened lately, we currently witness a strong market crash. Many traders and investors sit on the sideline, waiting for the storm to end. The saying usually goes like “after the rain comes the rainbow”. For the case of cryptocurrencies, this saying is very true, and that’s what we’re going to prove in this article. Many analysts predict an upcoming crypto boom, and that has to do with a key element that most crypto traders are familiar with: Stablecoins activities.
What is a Stablecoin?
Stablecoins are cryptocurrencies that operate on a certain blockchain and are decentralized by nature. The feature that differentiates them from other cryptocurrencies is the fact that they are pegged to a certain currency. As an example, Tether (USDT) is a stablecoin pegged to the United States Dollar. Every 1 USDT is equal to 1 USD.
Many critics claimed that companies behind stablecoins are not fully audited, and lack the financials to be able to peg their cryptocurrencies. In fact, to be able to really have a perfect peg, the creation of 1 stablecoin should have a 1 USD backing. If this fails, the value of this stablecoin would fall heavily.
Why are Analysts predicting a Crypto Boom soon?
It is very known that after every crash, the big players come in and buy the dip. We’re talking about Billions worth of cryptos being transferred from exchanges, all the way to private wallets. Additionally, most crypto investors tend to swap their cryptos in favor of Altcoins whenever the markets fluctuate heavily. They do so in order to hedge strong price fluctuations and to have an easy way to “park” their funds. See, liquidated back to “cash” is a long process, and that’s without even taking into consideration the transfer time from the exchange’s bank all the way to your bank. So most (if not all) crypto investors and traders do “park” their funds in stablecoins until the storm is over.
Well, today this is exactly the case. The amount of Stablecoins sitting idle in various exchanges is very high, the fact that confirmed that traders and investors are waiting to go back in the market and buy the dip. Stablecoin amounts are at an all-time high. Historically, after every “spike” in stablecoin volume, Bitcoin rose 30-50% upwards. Now we’re not saying that Bitcoin will recover tomorrow, but usually, prices tend to recover in stages:
- Whales start buying the dip
- Normal traders/investors switch from stablecoins back to cryptos
- Positive growth for few days
- Positive sentiment in the crypto market
- More buying power
- Downtrend breaks and reversal towards an uptrend (bottoms form strong supports)
What are the TOP 4 Stablecoins?
There are more than 40 stablecoins in the market, but the top solid ones that witnessed an insanely higher trading volume in the past 24 hours are as follows:
- Market Capitalization: USD 59.5 Billion
- Circulating Supply: 59,434,391,387 USDT
- Volume (24H): 160.3 Billion
USD Coin (USDC)
- Market Capitalization: USD 14.3 Billion
- Circulating Supply: 14,380,157,844 USDC
- Volume (24H): 5 Billion
Binance USD (BUSD)
- Market Capitalization: USD 8.6 Billion
- Circulating Supply: 8,615,478,723 BUSD
- Volume (24H): 10.2 Billion
- Market Capitalization: USD 4.2 Billion
- Circulating Supply: 4,227,439,289 DAI
- Volume (24H): 1.4 Billion
Many times before, the stablecoin reserves crossed with BTC prices, and soon after BTC prices picked up. In today’s case, the cross is significant, which might signal a stronger comeback. Now you might be asking “WHEN” will the crash end and prices recover? Well, it is a bit unclear when this would happen, but usually, any break of a downtrend and an extended consolidation is a good sign. So for now, we remain watching how the technicals would play out.
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