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The Role of USDC in Global Crypto Capital Markets

The Role of USDC in Global Crypto Capital Markets

Alex Behrens Alex Behrens April 20, 2021

Digital dollar stablecoins like USD Coin (USDC) have cemented their position in the global crypto capital markets as the go-to trading asset for professional crypto traders. Today, the majority of bitcoin trading volume takes place in stablecoins, not fiat currency, leading to explosive growth in the supply and circulation of dollar-pegged tokens throughout 2020.

What Are the Crypto Capital Markets?

Like traditional capital markets, crypto capital markets allow businesses and organizations to raise funds by issuing digital tokens, which later become tradable in the secondary market.

For investors, crypto capital markets provide a universe of investable assets ranging from security tokens representing a claim on equity or debt to more traditional cryptocurrencies like Bitcoin or Ethereum. 

Over the last year, more and more institutional investors and corporate organizations have started exploring crypto capital markets by adding exposure to Bitcoin to their portfolios or balance sheets. 

While Bitcoin often grabs headlines, crypto capital markets rely on stablecoins like USDC more than any other asset for reliable liquidity and instant settlement.

Stablecoins: The Backbone of the Crypto Capital Markets

Stablecoins have become the backbone of crypto capital markets based on a variety of advantages over traditional fiat currency rails:

  • Near-instantaneous transaction settlement 
  • Lower transaction costs than traditional rails
  • Transactional transparency in real-time
  • Reduces counterparty risk
  • Open, inclusive, and accessible worldwide
  • Programmable for automated transactions

As a result, professional crypto traders are increasingly switching their trading capital from fiat currency into stablecoins.

Digital Dollar Stablecoin Use Cases for Crypto Traders

There are three primary use cases for digital dollar stablecoins in the global crypto markets. 

  • As trading capital 
  • As a counterparty settlement instrument 
  • As a base currency to move in and out of risky crypto assets

An increasing number of crypto market participants are choosing stablecoins like USDC as their trading capital. Instead of holding funds in US dollars in a bank account where bank wires can take days, crypto traders are storing funds in digital dollars and using free Circle Accounts to quickly deploy capital globally when a trading opportunity arises.  

Stablecoins also function as a counterparty settlement instrument allowing fast and secure settlement with real-time transaction transparency. When processing a bank wire transfer, you won’t know exactly when your funds will arrive until they show up in your account. This can take hours or even days. Stablecoins like USDC offer a superior means to settle transactions in the crypto capital markets in minutes or seconds thanks to high-speed public blockchains.  

Finally, crypto traders use digital dollar stablecoins as a base currency to trade in and out of more volatile crypto assets like Bitcoin or Ethereum. Instead of transacting fiat-to-crypto and crypto-to-fiat when entering or exiting positions, traders can use stablecoins to seamlessly place trades within minutes. Stablecoin trading pairs also offer excellent liquid for leading digital assets, alleviating the need for regular use of fiat on- and off-ramps.

Digital dollar stablecoins have emerged as the backbone of the crypto capital markets, but not all stablecoins are created equal. The rapidly expanding stablecoin ecosystem offers USD-pegged crypto assets with varying degrees of trust, transparency, and adoption.

USDC stands out among its peers as the fastest-growing, fully-reserved digital dollar stablecoin with a broad ecosystem and a high adoption rate in the crypto capital markets. 

USDC: the Go-to Stablecoins for Professional Traders

USDC is a digital dollar stablecoin that empowers anyone in the world to store, send, and receive digital dollars over the internet. USDC is redeemable 1:1 for US dollars and backed by fully reserved assets held in regulated financial institutions.

As a multi-chain stablecoin, USDC operates on numerous leading 3rd generation blockchains to provide the highest level of speed and security to crypto market participants. USDC is available  on Ethereum, Algorand, Solana, and Stellar, with more blockchain partners on the way.

In combination with a Circle Account and the Circle suite of APIs, USDC can be used to:

For professional crypto trading operations, USDC combines all the best aspects of a market-leading stablecoin, plus a suite of plug-and-play APIs that allows quick integration of USDC into trading systems and platforms.

The Crypto Capital Markets Tomorrow

Crypto capital markets are rapidly evolving, and participants now include corporates, investment funds, hedge funds, prop trading houses, algorithmic trading firms, OTC trading desks, high-net worth individuals, and even traditional banks. And the list of market players is poised to grow even larger as crypto capital markets begin to integrate with the legacy capital market structures.

As the convergence of legacy and decentralized finance unfolds, digital dollar stablecoins like USDC will become even more important in global commerce and the digital economy.

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