What stablecoins can tell us about the global economy.
The overall circulation of stablecoins has decreased by ~$38B since early May.
To put that into perspective, there's currently ~$149B in circulation, which is 20% less than it's peak (in May).
But why, (if stablecoins are so...stable) such a drop?
There're only a few main reasons people put money into stablecoins:
To transact on the blockchain, without the risk of price fluctuation
To earn a yield by lending out their stablecoin through a protocol like Aave.
Use case 1 still happens all the time (hence the $149B still in circulation).
Use case 2...not so much.
Back in May, you could earn a guaranteed yield of around 3.5%. Today, however, that's dropped down to 2%.
At the same time, rate hikes have meant that the interest rates being offered by plain old bank accounts are becoming more competitive.
(And people tend to flock to the place where they'll get a guaranteed higher yield).
That, plus the collapse of the Terra LUNA algorithmic stablecoin, have scared people away.
And it makes sense, why put your money in something that is relatively new, and has a lower yield than a traditional fiat bank account?
Stablecoins have their place in the crypto ecosystem, but unless they offer other use cases, or higher yields than fiat accounts, they may see some tough times ahead.
The good news is, that doesn't really matter for Web3 in general.
Innovation goes on!
