Holding Stablecoins More Profitable Than Fiat In 2022

CryptoQuant – a blockchain analytics firm – has released a report assessing the data surrounding stablecoins and their sustainability. It found that holding most of the top stablecoins throughout 2022 would be slightly more profitable than holding US dollars.

According to the report, the historical average daily closing prices for nearly all of the top stablecoins are slightly above $1.

DAI — an Ethereum-based stablecoin backed by a mix of assets — has an average daily closing price of 40 basis points above $1. It held the highest premium among all stablecoins, with USDP and TUSD trading at a premium of 35 and 33 basis points, respectively.

CryptoQuant CEO Ki Young Ju tweeted about the data:

However, one stablecoin that trades at an overall discount over time is Tether (USDT) – the largest stablecoin by market capitalization. Tether has also been trading at the highest discount on record among competitors – a whopping 4%. Meanwhile, USDC (its top competitor) holds the equivalent record for the highest premium at 4%.

“It should be emphasized that most of Tether’s price deviation below $1.00 happened in 2017-2019,” clarifies the report, “and its daily close price has stabilized virtually at US $1 since 2020.”

The report also analyzes the price bias patterns of US dollar-pegged stablecoins over time. Precisely, it measures the “Peg Robustness” of each stablecoin – how much its market price differs from $1.

It found that GUSD is by far the most robust of all stablecoins. That means its price faces little downside volatility even in a high buyback environment. Meanwhile, USDT has the lowest durability of all stablecoins. That means its price deviation from $1 is high compared to the low buyback cash flow.

As the report explains, a stablecoin is a cryptocurrency designed to hold prices with a relatively stable underlying asset. These typically include fiat currencies and commodities such as gold and other financial assets.

Currently, the most popular stablecoins, including USDT, USDC, and Binance USD (BUSD), are pegged 1:1 to the US dollar. Typically, these coins maintain their fixed rates using a fully backed and highly liquid reserve, for which stablecoin holders can redeem their tokens at any time. any.

The now-defunct TerraUSD (UST) has tried an alternative model whereby LUNA – a highly volatile cryptocurrency, backs the token. However, this pattern proved unstable under pressure, with both coins crashing to zero in May.

Among the current top 3, both Circle and Paxos have clarified in recent testimonials that their USDC and BUSD reserves are backed entirely by cash and US treasuries. Only Tether remains with unresolved ambiguities.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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