This concise overview focuses on Bitcoin’s future prospects and highlights the significance of stablecoins in the crypto market, as emphasized in recent reports by CCData.
The June 2023 Stablecoins & CBDCs report from CCData, which was just published, highlighted the significance of stablecoins in the present crypto market. The paper did not provide any information regarding the future beyond mentioning the falling trend in stablecoin market capitalization in 2023.
Then, CCData released another research titled “Market Spotlight: Crypto Surges as Institutions Eye Spot Bitcoin ETF,” which instead concentrates on Bitcoin and provides some insight into how the cryptocurrency industry may develop in the future. The most recent edition of the weekly Digital Asset Digest notes that a number of legal and regulatory developments occurred during the previous week.
Bitcoin takes center stage while stablecoins, cryptocurrencies, and CBDCs are left behind
The news that appears to have had the largest effect is BlackRock’s request that the SEC authorize an ETF on spot Bitcoin.
The biggest asset manager in the world, Blackrock, made a move that prompted requests of a similar nature from numerous other financial institutions.
For example, when the first gold ETF was introduced, this served as a trigger for the beginning of a multi-year bull run for the price of the precious metal. Blackrock has maintained a 99.86% approval rate for its ETFs over the years.
Additionally, from the start of the second quarter, Bitcoin has severely lagged the S&P 500 index, and since BTC started to recover, the S&P 500’s advance appears to have come to an end.
In contrast to previous bull runs, this resurgence has been predominantly driven by an increase in purchasing pressure rather than short liquidations. For the first time since May 2021, Bitcoin’s market share has topped 50%, indicating that it has recently captured the attention of crypto investors.
In actuality, open interest on Bitcoin derivatives rose from $8.36 billion at the beginning of June to $9.80 billion. In comparison, open interest on ETH averaged $5.05 billion and remained largely steady.
Liquidity on US markets is declining
The research also mentions that various US cryptocurrency exchanges, including Binance US, Kraken, and Gemini, experienced a reduction in market liquidity in June; however, in the instance of BinanceUS, the decline reached as much as 71%.
In addition, liquidity on Coinbase has increased by 17% despite the SEC’s accusations.
The idea is that many US-based traders and market makers sought safety on the bigger US exchange.
At the same time, liquidity has surged on significant overseas exchanges like Binance and OKX, indicating increasing trading activity on exchanges outside the US.
While this is a trend that is now having an effect on the US cryptocurrency markets, the eventual arrival of titans like BlackRock into this sector in the future might drastically change the flow.
In spite of persisting legal issues and market volatility, BlackRock’s move indicates a rising interest by institutional investors in the cryptocurrency industry.
The prospects for stablecoins, CBDCs, and cryptocurrencies
The report’s authors wonder if BlackRock’s entry into the cryptocurrency futures market with its own ETF would have the same effect as the first ETF’s debut into the gold derivatives market in 2004.
Prior to that, the price of gold had been at $400 per ounce for about 25 years; nevertheless, starting in 2005, it increased to $700 and then to over $1,900 in 2011.
Even if the price of gold has since been consistent over the long term and is currently hovering around $1,930, such changes had never been witnessed in the financial market for gold previously.
The price of bitcoin, on the other hand, has never been constant for even an entire year, and a fresh innovation like the one that is most likely to be unveiled next year could cause it to move much more. It’s important to remember that 2024 will also mark the fourth halving of BTC.
The situation might be setting up for a true boom given that major players in traditional finance like Charles Schwab, Citadel Securities, and Fidelity Digital Assets are joining BlackRock.
The stablecoin environment
For the past 15 months, the market capitalization of the largest stablecoins backed by the US dollar has been declining.
It dropped 0.57% in June to hit $128 billion, the lowest amount since September 2021.
Stablecoin trading volume decreased by 10% to $414 billion in May. Since December of last year, stablecoins’ monthly trading volume on centralized exchanges has been at its lowest level.
There is nothing odd as long as stablecoin market capitalization decreases in tandem with the entire market capitalization of the cryptocurrency market, or in other words, as cryptocurrency prices fall.
It does jar a little bit, though, with recent advances, particularly Bitcoin’s price returning to annual highs.
BTC’s market capitalization increased from $521 billion to $596 billion over the past seven days, while UST’s increased only marginally from 83.1 to 83.2 and USDC’s decreased somewhat from 28.4 to 28.3.
In contrast, that of TUSD practically remained steady while that of DAI increased from $4.6 billion to $4.7 billion.
Clearly, stablecoins are not now having any impact on the price performance of cryptocurrencies, particularly that of Bitcoin, which has been performing the best recently among first- and second-tier cryptocurrencies.
A complete analysis of CBCDs
In contrast, the central bank digital currencies (CBDC) market appears to be stationary despite statements and announcements.
It is true that the International Monetary Fund (IMF) recently revealed a new platform for cross-border payments that is based on the CBDC, but the issue is that many CBDC initiatives have been put on hold or suspended.
China and Nigeria, the two sizable nations where they are presently available, are not making any appreciable strides in their implementation. However, it appears that many still like making traditional electronic payments using fiat money.
The new CBDC-based platform for cross-border payments being developed by the IMF is still simply a concept at this time.
Beyond the announcements of lofty proclamations, there is still very little concrete because such a platform would be useless in the absence of widely used CBDCs.
Additionally, there is currently a platform in place for cross-border payments. The Lightning Network is what it is known as, and it transfers bitcoin.
Combining that with exchanges that enable the conversion of Bitcoin to fiat currency and vice versa makes it look as though a platform like the one the IMF has proposed is not necessary.
In other words, while the crypto industry keeps progressing, the CBDC industry appears to be virtually at a standstill or moving very slowly.
The truth is that Bitcoin serves as both a medium of exchange and, more crucially, a safeguard against any excessively expansive monetary policies pursued by central banks, against which CBDCs are powerless to intervene.
