Institutional Investment Will Help Fuel Use of Stablecoins | ETF Trends

Stablecoins can help bridge the gap between fiat currencies and cryptocurrencies, giving institutional investors reason to pour more capital into these hybrid currencies.

Prospective crypto investors who are still on the fence with digital currencies can dip their toes into stablecoins. After all, with the recent price dips in leading cryptocurrencies like bitcoin and ether, caution is a necessity.

Furthermore, with the recent strength of the U.S. dollar, stablecoins pegged to the greenback can also capture this upside. That’s to be expected, given that the U.S. Federal Reserve is looking to raise interest rates this year, which should help prop up the dollar.

When a stablecoin is pegged to a fiat currency like the dollar, this helps to mute the volatility of the crypto market. Bitcoin demonstrated that volatility when it reached an all-time high of close to $70,000 in November 2021, but then fell almost 30% to below $50,000 recently.

Since stablecoins are inherently digital assets, they incorporate the instant processing that digital currencies can bring. Transactions from stablecoins to U.S. dollars or other currencies and vice versa can happen instantaneously, eliminating processing times to ensure that consumers have funds available when necessary.

More Institutional Adoption

The introduction of a bitcoin futures exchange traded fund (ETF) in the U.S. was a highlight in 2021 that put a stamp on institutional investors and the capital markets as a whole accepting cryptocurrencies as a legitimate, investable asset class. Stablecoins should also see more interest in 2022 if crypto market volatility spooks investors enough.

“The growth in adoption will continue, and institutional investors will fuel the continued popularity of stablecoins, which are seen as less risky,” said Jane Thomason of Kasei Holdings. “We will also continue to see rapid growth and innovation in emerging economies. Following the 2021 United Nations Climate Change Conference in Glasgow, there will be a plethora of green blockchains and tokenizing carbon offsets and gamification to address climate issues. The adoption of DeFi and NFTs in GameFi has only just begun, and we will see incredible innovation in this space with community-owned economies and on-ramps to the Metaverse.”

“My personal expectations and hopes are that we continue providing a bridge from the new world to the old, and ensure that we don’t have rose-tinted glasses on in the excitement of creating  incredible innovation,” Thomason added. “We need to consider ethics and basic human needs as we hurtle along this ever-exponentiating trajectory.”

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