Stablecoins Surge as Yields Soar and New Collaborations Shape the Future

The stablecoin sector continues to develop. Yields have been moving in an exciting direction. Partnerships are proliferating and appear to promise a lot.

While this is happening, major figures in the crypto and finance worlds (figures like Peter Thiel and Paolo Ardoino of Bitfinex and Tether) are pushing hard for something that looks a lot like a new tethered-to-the-real-world banking system, at least as far as the new blockchain for Tether’s USDt is concerned. What’s all this mean? It’s hard to say. But it at least seems stablecoins are getting more stable, and that’s a good development for the sector.

Rising Yields Amid Market Slowdown

One of the most notable trends in the stablecoin market has been the huge increase in yields, especially for USDC on the Dolomite platform. Just last week, yields on USDC shot up to an almost unbelievable 120% annual percentage yield (APY) as the volumes in the market were going down. This upswing in yield is really just a consequence of a relatively inactive market that was allowing users to earn more with their stablecoin. It serves as a nice, striking advertisement for what a simple lending platform can do for you, especially when you’re in a period of heightened volatility in the crypto market.

This high-yield opportunity might be a game-changer for investors seeking a stable, passive income in an environment that is often volatile and unpredictable.

The Dolomite platform appears to be benefitting from a decrease in trading volume, which typically leads to an increase in liquidity for lending platforms. Even amid the recent market downturn, we have observed an uptick in USDC yields on Dolomite. As crypto holders continue to migrate to stablecoins as a safer haven for their funds, the yield farming space remains a central part of the crypto ecosystem, serving as a bridge to the LP/DeFi space when capital is locked up in the market.

Major Collaborations and Innovations

In the latest development, stablecoins are now being recognized for their potential by traditional financial institutions. Standard Chartered, along with Animoca Brands and HKT, has created a new stablecoin that is backed by the Hong Kong dollar. This undertaking is emblematic of a nascent trend wherein big financial players are not only acknowledging stablecoins’ worth but are also developing their own to cater to specific local demands. The appearance of a stablecoin that is backed by the HKD should facilitate the sorts of cross-border transactions that digital currencies make possible and for which businesses and consumers in Hong Kong can now engage without the worry that they may be stepping onto an unstable surface.

In the meantime, the most recognized stablecoin in the world, Tether (USDT), manages to continue seeing some rather significant backing from some of the most prominent names in the crypto space. Peter Thiel, co-founder of PayPal, along with Paolo Ardoino, CTO of Tether, are busy overseeing the development of a shiny new blockchain that’s going to be built around USDt. This initiative places Tether in a positioned place (as the kids say) to maybe extend its already huge lead in the stablecoin space. And don’t be surprised if USDT on this blockchain ends up with some improved features, especially in terms of speed and transaction fees.

Stablecoins’ Growing Adoption Across the Globe

Brazil’s Galipolo has also seen a big jump in adopting cryptocurrencies. Today, we’re seeing an impressive 90% of transaction volume in the region linked to stablecoins. This is something that I think is very significant because it really highlights the growing role that digital currencies—especially stablecoins—are playing in emerging markets where people really need a way to hedge against inflation and where the traditional banking system is too slow and too expensive. A large portion of cryptocurrency transactions in Brazil is now tied to stablecoins. And it’s clear that these digital assets are now, for many people, a way to move money more securely and more efficiently than through bank transfers.

Stablecoins are still experiencing a large amount of minting activity. In the last 11 hours alone, we have seen some pretty significant amounts of USDT and USDC getting minted across several blockchains. Now, I’m not going to pretend that I understand all of the ins-and-outs of Tether, but I do know that they are pretty much the least transparent organization imaginable. Their lawyers are great at drawing up documents that have all the right words in them and making them sound good, but I know from personal experience that you should always be skeptical and ask questions when the very basic fact of an organization is that they are not open with the public.

It is interesting that direct minting of stablecoins on Ethereum has stayed low, indicating that other blockchains like Tron and Solana are becoming the preferred options for stablecoin issuance. This may be due to Ethereum’s high transaction fees and slow processing times, which are probably unappealing to projects and businesses that want to mint stablecoins at scale. Tron and Solana, on the other hand, are fast and cheap, which makes them much more appealing options for meeting market demand for stablecoins.

The Future of Stablecoins

Looking forward to 2025, stablecoins seem set for further innovation and growth. They bring together a compelling combination of high yields, rapid adoption, and strategic partnerships—not to mention the relatively lawless space they occupy between traditional finance and the crypto world. All this allows us to frame a rather opportune moment for them. Will our next meeting find us still in the DeFi world, now powered by stablecoin partnerships, or have we moved on to something even more adventurous?

The Zero Hedge post of November 20, 2023, asks these questions.

To summarize, with the backing of institutions, true regional innovation, and real en-masse adoption leading to user interfaces and experiences that really resonate with users, the amount of money in “stablecoins” is now verging on the ridiculous. And that is something that you can be sure will not change anytime soon.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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