Stablecoins have always been a way to hedge the heavy price fluctuation in the cryptocurrency market. Crypto traders and investors often swap their cryptos to stablecoins everytime the market starts to crash. This often cashes out the earnings made from capital gains while preserving the value of the portfolio. Binance, one of the biggest crypto exchanges has its own stablecoin called Binance USD (BUSD). This token suddenly rose to become the 11th biggest cryptocurrency by market cap. Why did this Binance BUSD rise so fast? Can this really signal another crypto bull market?
What is Binance USD (BUSD)?
Binance USD (BUSD) is a stablecoin issue by the crypto exchange Binance, and in partnership with Paxos. The latter releases monthly audits of BUSD’s reserves. BUSD is a 1:1 USD-backed stable coin, and it is talked that New York-based financial banks now allowed to list Binance USD on their platform.
Since they are pegged to a more stable asset such as the U.S. dollar, stablecoins such as BUSD were created to manage price swings often seen cryptocurrencies. Cryptocurrencies have proved to be sensitive to market events, but stablecoins tend to be less influenced by market conditions, but rather follow exactly the currency they are pegged to.
Why is Binance BUSD signaling a Market Bull?
Recently, BUSD was seen soaring in market capitalization. In fact, since their prices are fixed at USD 1, the factor which made BUSD rise in market cap is the total supply. When Demand rises for stablecoins, their backing company mints new stablecoins that are added to the total supply. This surge in stablecoins market cap was not only seen with BUSD, but with USDT, USDC and DAI.
The surge in the market cap of stablecoins signals an upcoming cryptocurrency bullrun. This is because recently, the crypto market crashed heavily and traders alongside investors had to liquidate some positions. When crypto holders liquidate, they often swap their tokens to stablecoins in order to stay ready for a quick market entry whenever prices recover.
Today, the market cap of the top stablecoins surpasses USD 100 Billion. This intriguing number can easily translate to other cryptocurrencies when markets recover. For example, a 10% swap from stablecoins towards XRP will have more than 30% price increase in the token itself.
The TOP stablecoins at a Glance
Binance USD (BUSD) managed to reach the 11th position on the list of the top cryptos by market cap. We won’t be surprised to see it even enter the top 10, as the difference with the #10 Uniswap is a mere USD 1.3 Billion. Here’s a quick overview of the top stablecoins by market cap as of Today.
- Tether (USDT): USD 62.2 Billion
- USD Coin (USDC): USD 26.1 Billion
- Binance USD (BUSD): USD 10.7 Billion
- Dai (DAI): USD 5.5 Billion
- Terra USD (UST): USD 1.9 Billion
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