Stablecoins, cryptocurrencies pegged to the price of $1 USD, have seen a mass adoption this year, according to Yahoo! Finance portal.
Data collected by on-chain analytics firm glassnode show stablecoins have seen huge adoption over the past few years. As more users adopt stablecoins, the price of these assets become more stable, as less arbitrage opportunities are created within the markets.
Stablecoin prices used to fluctuate a few percentage points in either direction but have since seen much higher rates of stability. This ensures that investors won’t experience significant slippage when buying or selling fiat-pegged stablecoins.
As an example, since the beginning of 2020, the number of wallets holding USDC has increased from less than 100,000 users to over 1 million.
DAI, a stablecoin created by MakerDAO, has seen similar growth over the 18 months. In January 2020, there were less than 25,000 cryptocurrency wallets that held the DAI stablecoin. In contrast, about 400,000 cryptocurrency wallets currently hold DAI today.
Why investors seek stablecoins?
According do the portal, investors are rushing into stablecoins because theoffer a low-risk way to earn solid interest that beats any rates offered in traditional markets.
Since blockchains cut out the middleman, lending markets in crypto have become extremely efficient, passing down value to those who deposit stablecoins into high-yield savings accounts.
Thanks to these early investors and the efficiencies of blockchain technology, anyone in the world can loan stablecoins such as USDC and DAI and earn nearly a 5-10% yield with very low risk.