The crypto winter has taken a lot of wind out of the sails that ballooned the world's largest cryptocurrency Bitcoin to more than $64,000 per token in late 2021. It has also taken a lot of interest out of the crypto market in general, with less buying activity this year.
Recently, however, the stablecoin USD Coin (USDC 0.00%), which currently has a market cap of close to $50 billion, has been trending on Google following some recent news. USDC is not a cryptocurrency but rather a stablecoin, which is a digital asset pegged to a commodity or currency.
As its name suggests, USDC is pegged to the U.S. dollar on a 1-for-1 basis, meaning there are actual U.S. dollars in reserve accounts backing each USDC. Let's take a look at two reasons USDC is trending right now and then whether or not it's a buy.
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1. Robinhood
The popular online retail brokerage Robinhood (HOOD -3.37%) continued to beef up its crypto offerings yesterday by adding USDC as its first-ever stablecoin on the platform. That also makes USDC the 17th digital asset on Robinhood's platform.
Robinhood has a big following, and at the end of the second quarter of this year had almost 23 million net cumulative funded accounts and 14 million monthly active users, so once a stock or digital asset is on the platform it's being exposed to a massive group of traders. There's also a good chance many of these traders have never purchased USDC before because many of the platform's users are fairly new retail investors.
It's also not as easy as one might think for digital assets to get listed on Robinhood. The company conducts a very rigorous vetting process to ensure as best as possible that it is not listing cryptocurrencies that might be considered unregistered securities.
2. Instant conversion into dollars
In another big announcement today involving USDC, the digital bank and digital asset custodian FV Bank announced that account holders will now be able to receive USDC directly into their accounts and have the funds instantly converted into U.S. dollars.
One of the big roadblocks to crypto adoption is friction. Think about it: To convert dollars into crypto you are typically working with several different accounts including your bank account and a crypto exchange. Then it can take several days to complete transfers and you may also incur fees along the way.
This new feature, according to FV Bank, will make this process much more efficient and make the settlement of international money transfers much faster than traditional bank transfers. FV Bank clients can now create and send invoices to international clients in USDC and get the money without having to go through a more lengthy conversion process.
Is USDC a buy?
I would say that both the listing on Robinhood and the new feature at FV Bank are positive developments for USDC. But remember, as a stablecoin pegged to the dollar, the goal of USDC is to always maintain its value at $1, which the stablecoin has largely achieved throughout its life except for the occasional slight deviation above and below $1.
The goal of USDC is to be a digital dollar bill and possess the properties of a digital asset that make the payments system more efficient and accessible. It's also this very reason that you would not invest in USDC for its ability to appreciate.
That said, USDC has functioned as a stablecoin and should be much more reliable than some of the riskier algorithmic stablecoins like Tether, which have at times rocked the crypto market.
You can also buy USDC and then lend it out and make as much as 10% interest on it but there are various conditions when you do this, so there are ways to make passive income on USDC. Whether or not you should buy USDC for investing purposes really depends on your investing style and strategy.
