With the market volatile, cryptocurrency investors have turned to stablecoins such as USDT and USDC to cover their losses. These dollar-pegged stablecoins are the clear winners of the recent crash, but this time investors appear to be taking it a step further. USDT trading volume on the Ethereum blockchain shows that investors are increasing their investment in these stablecoins.
USDT provides much-needed protection
Through the downtrend of the cryptocurrency market, only a few cryptocurrencies are able to maintain their value. They are all stablecoins, and while some have lost their pegs, most have been able to retain and provide investors with some much-needed reassurance. The fact that investors are turning to stablecoins to weather the bear market is evidenced by the large amount of USDT that investors are transferring every day.
Related reading | Market Downtrend Triggers Bitcoin Inflows from Institutional Investors
May 12, volume Tether USD traded on the Ethereum network hits an all-time high. Data shows that more than $33 billion worth of USDT was transferred through the network. This is significantly higher than the $24.5 billion USDT that was traded on February 4, 2021, an all-time high.
USDT-U.S. Dollar peg at $0.9990 | Source: USDTUSD on TradingView.com
However, the motivation behind both records is the same. Investors are moving away from highly volatile digital assets to assets that offer a certain level of stability. These investors also don’t want to cash out their digital assets for fiat, and assets like USDT or USDC provide an ideal place to store funds while waiting for the bear market to end.
Ethereum fees soar
One of the things that comes with investors moving to stablecoins like USDT is the increase in transaction fees on the Ethereum network. With such a high volume of hundreds of thousands of transactions, congestion is expected on the network, and gas fees must be increased to process these transactions.
Related reading | Ethereum falls to 10-month low as sell-off intensifies
This was the case on May 12, as the network recorded a large number of transactions.The gas fee for a single USDT transaction on the network is shown as up to $20 during this day. As many as 182,000 Tether transactions were made in 24 hours.
Despite the high demand for stablecoins, the market cap does not reflect this. In the past 24 hours, it has not increased, but decreased by 3.34%. Still, it remains a favorite among investors as it is the largest stablecoin in the market.
At the time of writing, one USDT sells for $0.9988, which remains tightly pegged to the U.S. dollar.
Featured image from Wccftech, chart from TradingView.com