The main trading medium of the current cryptocurrency is the U.S. dollar stablecoin. In fact, the original U.S. dollar stablecoin USDT was created to facilitate global users to trade cryptocurrencies. Today, various USD stablecoins have become the default trading medium for cryptocurrency transactions.
These US dollar-based stablecoins include USDT, USDC, PAX, and GUSD, among which USDT still occupies most of the market share. These stablecoins can be divided into two categories according to compliance and non-compliance. There has always been a lot of uncertainty in USDT's compliance. USDC, PAX and GUSD are issued in strict accordance with the US dollar 1:1 within the scope of U.S. regulatory. Regardless of the compliance properties of these stablecoins, they are currently used in cryptocurrency trading worldwide, including transactions with Bitcoin, of course.
The coupling of Bitcoin as a store of value with the US dollar
Recently, the U.S. financial regulatory stance on stablecoins has been clarified, indicating that it encourages the issuance of digital stablecoins based on US dollars in the U.S. market. In view of the various innovation opportunities that USD stablecoins can bring, it is expected that a large number of USD stablecoins will be produced in the market. These newly generated USD stablecoins will change the existing USD stablecoin market structure. One of the most important changes will definitely be to determine the nature of USDT and there will be corresponding regulatory measures. And this will definitely affect the market share of each dollar stablecoin in the market.
One of the most direct results of the emergence of a large number of USD stablecoins is to further strengthen the position of the U.S. dollar in cryptocurrency transactions. Given that the newly emerging US dollar stablecoin will be issued under the premise of compliance, more funds will flow into the USD stablecoin. Traders who hold these USD stablecoins for cryptocurrencies can also reduce their risk exposure in this medium of exchange. Therefore, in terms of transactions, the USD stablecoin will be more closely coupled with Bitcoin.
The coupling of Bitcoin as a value transfer tool with the US dollar
In the cryptocurrency trading market, Bitcoin is used as a store of value for trading. The main purpose of users who engage in these transactions is to keep their assets from depreciation, especially to hedge against the depreciation of the US dollar. So in this sense, Bitcoin can be said to be the biggest competitive product competing with the US dollar. However, as a value transfer tool, in some other parts of the world, Bitcoin's value transfer tool properties are used to exchange local legal currency and US dollars.
In some areas with economic turmoil and rapid currency devaluation, due to the depreciation of the local legal currency, some transactions in the market can only be completed through US dollars. For local users, one of their exchangeable channels is to exchange Bitcoins for the US dollars they need for daily transactions. This is the case in Lebanon, for example. In this case, Bitcoin has become an exchange intermediary between local legal currency and US dollars. Therefore, there is a cooperative relationship between Bitcoin and the US dollar. However, when the USD stablecoin appears, the market demand for this attribute of Bitcoin will definitely weaken, because the exchange between local legal currency and US dollar stablecoin will be more convenient.
U.S. regulatory policies will further promote the coupling of Bitcoin and the U.S. dollar
At the beginning of 2021, the new US government takes office. In terms of the financial regulators, the core figure is Gary Gensler. Gensler first served as an advisor to the financial regulator of the Biden government transition team. He has now been nominated as the new chairman of the SEC. It is believed that under his influence, candidates for the other two major financial regulatory agencies in the United States, CFTC and OCC, were nominated. Both of these candidates have extensive experience in the field of blockchain digital crypto assets. If the candidate appointments of these three financial regulatory agencies are passed, they will definitely promote the development of digital crypto finance in the U.S. market.
Under the impetus of the new financial regulatory, one change that will occur is the further recognition of Bitcoin in terms of supervision. Specifically, Bitcoin will be traded as a mainstream trading product on digital asset exchanges in the United States. In addition, Bitcoin-based ETFs will also be approved for trading on existing stock exchanges. Therefore, these measures will promote the further coupling of the US dollar and Bitcoin.