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Binance stablecoin’s exponential growth shows crypto investors are flocking for safety

Binance stablecoin’s exponential growth shows crypto investors are flocking for safety

Binance’s BUSD has become the fifth largest stablecoin by market capitalization, as investors flock to stablecoins for safety amidst extreme volatility in both the crypto and global financial market.

BUSD was launched in September 2019 in collaboration with Paxos with approval from the New York State Department of Financial Services (NYDFS).

Changpeng Zhao, the CEO of Binance, said at the time:

“We hope to unlock more financial services for the greater blockchain ecosystem through the issuance of BUSD, including more use cases and utility through the power of stable digital assets.”

Uncertainty in the global financial market has rattled crypto, but Bitcoin isn’t performing all that bad

Amidst heightened fear towards the coronavirus pandemic, the global stock market downtrend has shown a clear lack of appetite from investors towards high-risk assets in recent weeks.

While Bitcoin and cryptocurrencies, in general, cannot be categorized as a risk-on asset as of yet, the frantic sell-off of all asset classes including gold, has led the crypto market to pull back.

As investors increasingly moved towards the stablecoin market as a hedge to uncertainty in crypto, major stablecoins have started to overtake top cryptocurrencies in terms of market capitalization.

bitcoin crypto
The Bitcoin price dropped to $3,600, breaking below all major support levels (source: tradingview.com)

As of March 17, Binance’s BUSD ranks as the 35th largest crypto asset by market capitalization, overtaking cryptocurrencies like Hedera Hashgraph, TrueUSD, and VeChain.

The rapid increase in the market capitalization of BUSD primarily shows that the confidence of investors towards an NYSDF-regulated stablecoin is noticeably rising amidst a severe crypto market correction.

Will the rise of stablecoins continue?

According to Chris Burniske, partner at New York-based venture capital firm Placeholder, the bottom of Bitcoin may have not been hit in the recent correction to $3,600.

Burniske said:

“Lots of people asking where BTC bottoms. The short of it is I wouldn’t be surprised to see a retest of our 2018 lows near $3000. Historically, I’ve relied on the 200 week moving average (yellow line below) as our bear market bottom, but we we fell through that at ~$5500 last Thursday.”

Similar to the U.S. stock market and the breach of multi-year trend lines by both the S&P 500 and the Dow Jones Industrial Average (DJIA), the abrupt fall to $3,600 by Bitcoin on March 12 led nearly all major support levels to be broken in quick succession.

With large stimulus packages and changes to fiscal policies having minimal impact on the U.S. stock market, the Bitcoin price remains vulnerable to another large pullback in the near-term if the correlation with stocks continues on.

If the volatility in the crypto market intensifies once again in the coming days following the 13 percent drop of the Dow Jones on March 16, the demand for stablecoins like Tether and BUSD is likely to increase in the near-term.

For more information, see CryptoSlate’s stablecoin rankings.

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Posted In: , Stablecoins

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