• Just over 3 weeks left to Bitcoin halving
  • Ethereum-based stablecoins grow in popularity, pushing Ether prices higher
  • Bitcoin options market hit month-high of USD 642 million as Bitcoin turns bullish

Just over three weeks remain before the Bitcoin halving event that will occur in May, cutting the supply of newly-generated bitcoin by miners by 50%, thereby reducing the flow of new coins into circulation and further enhancing Bitcoin’s deflationary economic model.

But Bitcoin isn’t the only one that is enjoying bullish outlooks in the medium-term, as the biggest altcoin network, Ethereum, benefits from an increasing number of stablecoins issued over the last 30 days on its blockchain network.

The last Friday alone has seen Ether try to do a double percentage price increase, while Bitcoin has only managed half of its rice, and alongside this, the top five stablecoins — digital tokens pegged to fiat money or a basket of fiat money — increased their total supply by over 25%.

Good old Tether (USDT) as expected, led the give, issuing USD 1.5 billion worth of tokens since 12 March, the day that massive selling and liquidations forced BitMEX to take its platform offline after USD 700 million was racked up, and DeFi platform MakerDAO seeing lots of users get wiped out, throwing ETH below USD 100 for the first time since 2018.

But with March seeing lower volumes in spot trading and low volatility accompanying it, more stablecoins are being issued, which doesn’t immediately make sense. Crypto financial services company Blockfill director of sales and institutional trading Neil van Huis believes that the growth is fueled by those other than American traders trying to access US dollars by alternative means. Citing USDC as an example of a collaboration between US crypto firms Coinbase and Circle, he explains:

“I think offshore and non-US participation in getting access to [the U.S. dollar] through stablecoins is the culprit… Stablecoins, outside of tether, have become much more accessible globally.”

Bitfinex, the crypto exchange and issuer of Tether, believes that stablecoins are a low-friction gateway to crypto. Bitfinex general counsel Stuart Hoegner says that USDT’s presence is on exchanges where actual US dollars simply aren’t available:

“Possible reasons for demand for stablecoin issuance might include users wishing to buy other digital assets and using stablecoins as a low-friction on-ramp as we believe they always have. In any event, we are gratified by the recent market demand for USDT.”

And how does this translate into an Ether boom? According to exchange aggregator SFOX’s head of business development, Daniel Kim, it is also the so-called decentralized finance (DeFi) products that are pushing Ether investment, since these concepts require the use of stablecoins, thus their demand and issuance to meet that demand. He explained: “With market uncertainty, investors are looking for a safe yield investment, which stablecoins are providing.”

Speaking of gateways to crypto exposure, Bitcoin options markets have been picking up steam as well, on the back of Bitcoin’s return to USD 7,000 and an awareness that we are edging closer to the halving event. According to data analysts Skew, major exchanges listing Bitcoin options like Bakkt, CME, Deribit, LedgerX, and OKEx have seen daily trading volume rise to USD 86.4 million last week, the highest from almost a month ago.

Mote than 85% of that total was based in Deribit alone, the biggest crypto exchange by volume, while the institutional investor favorite of CME only saw USD 832,000 in options contracts change hands. But the takeaway is open interest, which climbed past USD 642 million after plunging depths below USD 400 million in March.

Observers believe that once Bitcoin supply is halved, price could go up significantly and investors might turn to options market to place hedging bets, just in case price does not go up as expected. Head of research at Stack, Lennard Neo, summarizes: “Next month’s halving should serve as a catalyst for more bullish medium to long term price action.”

 

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