It seems that the weather is still going to be bad in crypto land. Central banks continue to raise interest rates, the situation with Russia does not look happy and regulators are also adopting a different tone. Still, Bank of America sees a little bit of sunshine through the dark clouds.
Crypto remains risky
In a report to investors last Friday, the US investment bank wrote that cryptocurrencies are likely to remain risky assets, rather than becoming a ‘safe haven’. That writes CoinDesk.
Many crypto assets have a very limited token supply, which theoretically allows them to form an inflation hedge. But since the end of last year it is not at all, instead many cryptos crash just as hard as, for example, risky stocks. The bank also believes that interest rates will continue to rise worldwide, which will logically continue to have a negative effect on crypto assets. It also believes investors will be more cautious about investing in Ethereum (ETH).
Large stablecoin inflows
But at the same time, the stablecoin market is looking brighter. The four largest stablecoins saw $490 million in inflows. That is 58% more than last week. Inflows in this crypto class means more liquidity is coming into the market, meaning there is more money to spend on volatile non-stablecoins. That is actually positive for the market.
So Bank of America is actually saying that it doesn’t see interest rates falling and so that we probably won’t see a new bull market anytime soon, but an interim rise is now all the more likely. It is, of course, possible that this relief rally will be.
Right now, the four largest stablecoins from largest to smallest are Tether’s USDT, Circle’s USDC, Binance’s BUSD and MakerDAO’s DAI. It is striking that according to CoinGecko the market value of USDT, DAI and BUSD has risen slightly while USDC has shrunk. USDT and DAI are riskier as the collateral of both tokens appears to be riskier.
The contraction in USDC and the growth in BUSD will be related to Binance having stopped supporting USDC trading pairs in favor of BUSD.