Stablecoins can “disrupt” and transfer shocks to other markets

The cumulative market capitalization of the top 3 stablecoins has more than tripled over the year to date, reaching around $ 100 billion this week, according to Cointelegraph statistical. The market value of USDT, USDC and BUSD increased 158%, 400% and 742%, respectively.

Previously, the International Monetary Fund (IMF) published a report highlights the growth of these assets while warning of broader economic problems in the future.

It seems that it is not just the IMF that is so concerned now.

Stablecoins can shock other markets

One of the “Big Three” credit rating agencies, Fitch Ratings, has one report said stablecoin growth could have an impact on the equity and commercial paper (CP) markets. According to the organization, stablecoins can be “disruptive” and this “stablecoin-related chaos” will spread “shocks” to other markets.

As highlighted in the report, stablecoins are growing exponentially. For example, at the end of June 2021, USDT holds 49% of its reserves in certificates of deposit and CP.

“The rapid growth of stablecoins means that these holdings are relatively large. Although USDT’s annual market value growth slowed to 45% in the second quarter of 2021, it rose 230% from early 2021 to October 15, reaching $ 68.6 billion.

“Current growth rates and reserve allocation suggest that stablecoins could become an important group of investors in the US CP market.”

Now consider the following hypotheses:

Scenario shows stablecoin CP stocks exceeding US money market funds

With stablecoins expanding rapidly and marginal stablecoin reserves in commercial papers reaching 20%, stablecoin holdings could later outperform money market funds by mid-2023.

Stablecoins make difficult forecasts?

In the meantime, the above risk could also be exacerbated by the heavy reliance on the infrastructure and partners of the stablecoin issuers.

“The volatility of stablecoin growth and the opaque nature of actual stocks make it difficult to forecast.”

Even a recent report from Bloomberg’s Businessweek targeted USDT. Similarly, the main concern revolves around the ambiguity of Tether. However, the stablecoin issuer has spoken out vehemently against the report, as reported by Bitcoin Magazine.

In addition, Fitch Ratings also warned that stablecoins “could create new short-term credit market risks”.

Legal requirements to hold more reserves with safer assets could ultimately reduce the allocation of commercial paper. At the same time, it could increase the impact of stablecoins on short-term national debt. However, the timing and details of regulation in key markets such as the US and EU remain unclear.

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Minh Anh

According to AMBCrypto

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