NEW YORK: Stablecoins, which are virtual tokens pegged to traditional currencies such as the US dollar, held gains on Thursday in the midst of a sell-off in risk assets such as stocks and bitcoin after Russia launched a full-scale invasion of Ukraine.
Most stablecoins were slightly higher on the day. Their market capitalisation was up 0.3 per cent at US$182.5 billion, according to cryptocurrency data tracker coinmarketcap.com. Its daily trading volume, though, surged 75 per cent to US$108.1 billion.
In contrast, both bitcoin and ether dropped to one-month lows. Bitcoin was last down 3.1 per cent at US$36,121, while ether slid 4.1 per cent to US$2,475, following Russia’s invasion.
Ukrainian forces battled Russian invaders around nearly all of the country’s perimeter on Thursday after Moscow mounted a mass assault by land, sea and air in the biggest attack on a European state since World War Two.
“You have a risk-off environment that’s been happening for months now, and that in some ways has increased the demand for digital dollars, and so we’ve certainly seen into the end of last year and through today pretty significant growth in demand for USDC,” said Jeremy Allaire, cofounder and chief executive officer of Circle, referring to the stablecoin USD coin, pegged to the US dollar on a 1-to-1 basis.
The USD Coin was up 0.1 per cent at US$1, coinmarketcap data show. Some of the biggest stablecoin gainers were Fei USD, a stablecoin in the decentralised finance space, which was up 1.2 per cent, and Liquity USD, which rose 1.4 per cent.
“While stablecoins have a much tighter range and less volatility than other crypto assets, in reality their supply is limited,” said Joe DiPasquale, chief executive officer at BitBull Capital, which manages crypto funds.
“When there is a spike in demand for assets like USDC on exchanges, it’s possible to see their value go up a fraction of a percent, as we’ve seen in the last 24 hours,” he added.
The Russian invasion has dampened the notion that bitcoin is a safe haven, analysts, said. In fact, the world’s largest cryptocurrency has behaved more like a risk asset. Since the beginning of the year when the Russia-Ukraine crisis started percolating, bitcoin has lost 22 per cent of its value against the dollar.
Investors have flocked to Treasuries and the US dollar, and even gold, the asset that has been compared to bitcoin.
The benchmark US Treasury yield fell about 4 basis points to 1.9425 per cent, as prices rose, while the dollar index rose to its highest since late June 2020. It was last up 1.2 per cent at 97.382.
Gold surged to its highest since September 2020. It last changed hands at US$1,922, up 0.8 per cent.