In times like these, when the entire cryptocurrency market is rock bottom and no industry-wide ramp-up has been seen, traders need to dig into data to see how market dynamics may have shifted to see signs of new growth.
Stablecoins are the latest trend in decentralized finance (DeFi) because of the resilience they add to the sector, especially as protocols that rely more on the dollar-linked assets continue to offer token holders low risk return opportunities in turbulent market conditions.
Possible evidence of a rising influence of stablecoins can be found in the difference between the decline in Ethers (ETH) price and the total value locked in smart contracts. The price of Ether fell from its peak by 20% more than the decline in the entire TVL of the DeFi sector.
When you consider that most of the crypto market has seen price declines at the level of Ether, the fact that the DeFi TVL fell less than the price of Ether in percentage terms suggests the stability stablecoins offer.
Stablecoin market capitalization increased tenfold
The total amount of stablecoins available in the market has grown from under $ 15 billion to more than $ 113 billion over the past year, led by Tether (USDT) and USD Coin (USDC), giving the DeFi protocols greater liquidity confers.
The top stablecoins are contained in a large percentage of the liquidity pools (LP) available on DeFi platforms, as well as a standalone token that users can deposit on protocols like Aave for a return. This continues to make them an integral part of the burgeoning DeFi ecosystem.
Indeed, stablecoins have resulted in the creation of a specialized subset of DeFi protocols that focus on income breeding from stablecoins, providing investors with a safer way to generate income while minimizing risk.
Early on in the DeFi craze, protocols attracted new users and deposits by offering high returns that were usually paid out in the protocol’s native token.
With the majority of DeFi tokens now falling at least 75% below their all-time highs, according to data from Messari, many of the gains users believed they made by staking and providing liquidity have been lost for those received There is little to show risk on these experimental platforms.
The battle for stablecoin liquidity
The rise of successful stablecoin-focused protocols like Curve Finance, a decentralized exchange for stablecoins that uses an automated market maker to manage liquidity, platforms like Yearn.finance, Convex Finance, and Stake DAO are struggling to provide the best incentives that attract a greater proportion of the Curve ecosystem.
The delivery of stablecoins to Curve or as a stablecoin LP such as a USDC / USDT pair is equivalent to the blockchain version of a savings account. Many of the top protocols, including the three listed above, offer between 10% and 30% returns on stablecoins deposits on average.
Connected: How stablecoins stay stable is explained
Smart contracts allow users to deposit into automated, composite stablecoin liquidity logs, reducing the stress of daily market fluctuations.
The aftermath of the May 19 sell-off is still affecting investors, and at times like these, the return opportunities from delivering stablecoins to DeFi Protocols are an attractive way to diversify a crypto portfolio and hedge against market declines.
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