This week, the world may dip into one of the most uncertain economic times in living memory, leading to a cryptocurrency crash that is reminiscent of March 2020.
Whatever your outlook on Ethereum. Whatever exciting new developments may lie in the weeks and months ahead. All of it is obscured by the possibility of a US election impasse that could throw global markets into panic.
With the US election now just a day away, comments made by politicians and White House advisors have made it clear that this election will not be won or lost without a fight (figuratively speaking, hopefully).
As if the possibility of a democratic crisis in the US wasn’t enough, Europe has begun its next round of lockdowns with the UK the latest to announce yet more restrictive measures.
The pandemic’s second punishing blow to the market may be days or even hours away and the cryptocurrency markets – like last time – will not get a free pass.
While the crash may echo that of March, the story – for Ethereum at least – will not.
In March 2020 the Ethereum blockchain served little benefit to nervous investors looking for the safety of USD. At the time the decentralized exchange, Uniswap, had just $20 million of liquidity, impeding large scale trading and forcing most investors onto centralized exchanges like Coinbase. Today, the liquidity on Uniswap is just shy of $3 billion.
Stablecoin liquidity on Ethereum has had a similar story. In March, Circle’s USD Coin (USDC) had $500 million circulating. Today, that figure stands at nearly $3 billion. Tether’s USDT also saw 4x growth with $11 billion now circulating on Ethereum and the decentralized stablecoin, DAI, had a 10x increase in its circulation over the same period.
This isn’t even the half of it. Back in March there were very few options for earning interest on stablecoins using the Ethereum blockchain. Compound.finance may have earned investors a couple of percent while the Dai Savings Rate (which went to zero after Black Thursday) offered a meagre 4.00% on deposits.
Today, the options for producing an income with stablecoin deposits on Ethereum are vast. Users can earn anywhere from 5% through to over 50% on digital US Dollars depending on their risk appetite. Not only that, but swapping out of ETH (and even BTC now that 1% of its supply exists on Ethereum) to USD is now possible with close to zero slippage thanks to Uniswap’s enormous growth in liquidity.
All of these products are made possible by Ethereum and without the need for dealing with cumbersome and oftentimes risky centralized exchanges. In the Black Thursday crash, the exit to USD was facilitated off-chain. This time around (if indeed it does happen), it’ll be done on-chain.
When the cryptocurrency markets crashed back in March it was fairly apparent that Ethereum was oversold by a fearful and irrational market. Should the markets crash this week, that same irrationality and fear will be even more jarring: Ethereum will see its value plummet while also showcasing the blockchain’s vibrant network of stable-dollar safe havens and frictionless trade that ultimately make Ethereum and ETH enormously valuable.