Unbacked cryptocurrencies, such as bitcoin (BTC) and ether (ETH), are primarily driven by speculative motives, whereas stablecoins, which are cryptocurrencies whose value is pegged to a reference asset like the US dollar, are increasingly used for transactions and remittances, according to a new research by the Bank for International Settlements (BIS).

The study analyzed global cross-border flows of major cryptocurrencies and stablecoins from 2017 to 2024, focusing on how BTC, ETH, Tether (USDT), and USD Coin (USDC) are used and identifying the key factors influencing their movement.

Unbacked cryptocurrencies as a speculative financial assets

The research shows that native cryptocurrencies like BTC and ETH primarily move in response to speculative motives, such as investing or betting on price movements. These moves are influenced by global funding conditions, such as interest rates and monetary policies.

In particular, the research found that a 1% increase in high-yield credit spreads, a common indicator of financial stress or tighter credit conditions, results in over a 3% drop in BTCn flows. This suggests that when borrowing becomes more expensive or risk aversion rises in financial markets, cross-border BTC activity declines.

The research also found that a 1% appreciation in the US dollar leads to a 10% decline in cross-border BTC flows. This suggests that BTC behaves more like a risk asset, closely tied to investor access to capital and exchange rate dynamics, rather than a safe haven.

Overall, these findings reveal that BTC is not independent from traditional financial markets. Instead, it behaves like a speculative, risk-sensitive asset that’s interconnected with mainstream finance, the report says.

Stablecoin as a medium of exchange for remittances

While stablecoins share a number of characteristics with unbacked cryptocurrencies, they are more distinctly transactional, more often used for payments or remittances.

The research found that stablecoin flows are influenced by conditions in sender and recipient countries, such as inflation, exchange rate volatility, and capital controls. In particular, high inflation in the sending or receiving country is associated with an increase in transaction volumes to the tune of about 50% for USDC. This finding resonates with the attractiveness of stablecoins for international transactions among countries facing inflationary pressure.

High economic growth, by comparison, only modestly adds to cross-border crypto activity. The effect is strongest for BTC, with about a 10% rise in activity in high-growth countries. For ETH and stablecoins, transaction volumes increase by approximately 6% when either the sending or receiving country experienced strong GDP growth in the previous quarter.

US, UK lead cross-border crypto flows

Across the four cryptocurrencies studied, the research found that international flows reached a peak of US$2.6 trillion in 2021, roughly equivalent to 12% of global trade in goods at the time. Of this amount, US$1.2 trillion was accounted for by stablecoins, representing 46% of the market.

Although transaction volumes fell back to US$1.8 trillion in 2023, they have since resurged, indicating a continued expansion of the crypto ecosystem.

The research highlights the US and the UK as major hubs for cross-border cryptocurrency flows. In 2023-2024, they were the two largest nodes in the ETH and USDC networks, respectively. Together, these markets accounted for about 20% of cross-border activity in BTC and USDC, and close to 30% for ETH.

In comparison to BTC, USDT flows are more geographically distributed, with Turkey and Russia, in particular, emerging as key players. As cross-border volumes jumped from US$13 billion in 2019 to more than US$1,100 billion in 2023-2024, Turkey became the second largest sender and receiver of USDT, according to the Chainalysis data. Together with Russia, they represented about 12% of USDT cross-border volume.

Bitcoin has been on a strong upward trajectory since early April, surging about 50% from about US$75,000 on April 07, to a new all-time high record of US$112,000 on May 22.

This rally has been fueled in part by growing political support for the crypto industry in the US. This week, the Senate voted to advance the first crypto legislation, which would create a regulatory framework for stablecoins. President Trump has said he wants to see crypto regulation ready to sign by August before tge congressional recess.

Featured image: Edited by Fintech News Switzerland, based on images by marcostristao and Dang Pham via Freepik