In times like the present, when the entire crypto market is collapsing and there are major risks across the industry, traders need to examine the data to see how market dynamics change and identify new growth signals.

Stablecoins are the latest trend in decentralized finance (DeFi) because of the resilience they add to the sector. Especially since protocols that rely more heavily on US dollar fixed assets continue to offer token holders low-risk opportunities for profit in turbulent market conditions.

Proof of the growing influence of stablecoins is the decreasing difference between ETH price and Total Value Locked (TVL) in smart contracts.

Reduction TVL in the smart contract vs. discount ETH | Source: Glass knot

Given that most of the market has seen a price drop comparable to ETH’s, TVL DeFi’s less-than-ETH price drop shows that stablecoins offer stability.

Market capitalization S.Table coin increased 10 times

The total capitalization of stablecoins available in the market has grown from less than $ 15 billion to over $ 113 billion over the past year, led by USDT and USDC, adding more liquidity to the DeFi protocols.

The seven best stablecoins by market capitalization | Source: CoinGecko

The top stablecoins make up a large percentage of the liquidity pool (LP) pairs available on the DeFi platform and also act as standalone tokens that users can put on protocols like Aave in order to be profitable. This continues to make them an integral part of the growing DeFi ecosystem.

In fact, stablecoins also set the stage for the establishment of a specialized subset of DeFi protocols that focus on stablecoins income breeding, providing investors with a safer way to make profits while minimizing risk.

From the start of the DeFi craze, protocols attracted new users and deposits by offering high returns and often cashing out using the protocol’s native token.

With the majority of DeFi tokens now down at least 75% below their all-time highs, according to data from Messari, many of the profits that users believe they are making by betting and providing liquidity have largely fizzled out and left very little, which shows the risk on these experimental platforms.

The battle for stablecoin liquidity

The development of successful stablecoin-focused protocols like Curve Finance (a decentralized exchange for stablecoins that uses automated market generators to manage liquidity), platforms like Yearn.finance, Convex Finance and Stake DAO are leading to fierce competition for the best offer that appeals to one larger part of the Curve ecosystem.

Offering a stablecoin to Curve or as an LP stablecoin like the USDC / USDT pair corresponds to the blockchain version of a savings account. Many of the top protocols, including the three above, offer an average return of 10 to 30% on stablecoin deposits.

Smart contracts allow users to deposit funds into automated, hybrid stablecoin liquidity protocols to ease the stress of daily market volatility.

Total market capitalization of 100 character Top DeFi | Source: CoinGecko

The aftermath of the May 19 sell-off is still affecting investors, and at times like this, being able to capitalize on stablecoins on offer for DeFi protocols is an attractive way to diversify. Diversify your cryptocurrency portfolio and protect yourself against market declines.

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