2018 has been famous in crypto for two things - a hard-hitting bear market and the rise of stablecoins, making cryptocurrency investment for the masses a far more attractive concept. Many believe that stablecoins will eventually lead to cryptocurrency adoption, as, in order to sell crypto to the mainstream, a currency that is balanced and pegged to a familiar asset needs to be used, otherwise, people will get confused with changing prices. Using a stablecoin means a direct price switch can be made, so $100.00 worth of FIAT can be transferred into $100.00 worth of stablecoin, and that $100.00 will remain at $100.00, not subject to the volatile and changing prices of the markets as stablecoins like USDT and TrueUSD are all tied to the price of FIAT currencies like the US Dollar and the Euro.
According to Investopedia:
“Stablecoins are unlike conventional cryptocurrencies because they do not have a limited supply or fixed schedule. Instead, they are disbursed based on market conditions and economics. They are also backed by collateral to safeguard investors from a crash in the markets. For example, Tether claims to have as many dollars in an unspecified bank account as there are Tether coins in circulation. This approach helps it to trade at parity with fiat currencies. The absence of volatility in prices also means that stablecoins can also be used to purchase items or exchanged with fiat currencies or other cryptocurrencies.”
Of course, stablecoins do cause some problems
There is one big thing that is preventing stablecoins from becoming a really big deal - that is, news regarding market manipulation. Tether, for example, is one of the largest digital currencies in the market and is traded at in mass volume, however, USDT constantly hits the headlines because of its associations with market manipulation. Very recently, ZyCrypto even published a story titled: Tether Unable to Shake Claims of Market Manipulation, during which, an anonymous writer states:
“Accusations and allegations come and go like wildfire in the world of cryptocurrency, but the suspicion surrounding Tether and its potential involvement in market manipulation is perhaps the most persistent story of 2018. Of course, Tether and Bitfinex are under the same ownership, adding fuel to the fire that the exchange may have used Tether to buy Bitcoin at strategic moments to artificially inflate its price. The theory dates back to the end of 2017 when Bitcoin rose spectacularly to a value of almost $20,000, before falling throughout 2018 to a new 12-month low today of $4500.”
Tied in with questions surrounding ownership and centralisation, can stablecoins ever become all that popular?
Well, we think so, eventually all stablecoins will have to clean their act up and will have to move away from these notions of manipulation, how they will do this is unclear, I guess the best thing now is for the companies behind these stablecoins to remain as transparent and honest as possible. When they do, investors will start to trust them and with trust, comes a huge boost in investment. With more people then buying stablecoins, the next step has to be that more people will buy cryptocurrency too, as that’s what stablecoins are made for.
Which stablecoin will rule them all?
Down to the nitty gritty question then, which stablecoin will rule them all, Tether (USDT) or TrueUSD. Yes, other stablecoins do exist, but we want to focus on these two for the sake of argument.
Tether, you could argue has already made it. Ranked 8th in the markets by market cap, and accessible worldwide, Tether is the most notorious and the most widely used stablecoin. As mentioned though, it’s associations with market manipulation does seem to be stopping Tether from becoming truly adopted, therefore we can argue that Tether hasn’t won the race just yet.
TrueUSD want to get past this idea of manipulation by promising to be consistently transparent, according to Finance Magnates:
“TrueUSD has promised to regularly publish audits conducted by Cohen & Co., an investment management firm based in Philadelphia. TrustToken, the company responsible for the launch of TrueUSD, keeps its funds in multiple escrow accounts to prevent large-scale hacks or other kinds of theft. TrueUSD is well on its way to becoming the industry’s go-to stablecoin. While Tether’s market cap seems to be steadily falling, TrueUSD’s seems to be steadily rising.”
There is no way of knowing which of the two will become top dog in the stablecoin world. Indeed, Tether and TrueUSD could be wiped out by a more controversial stablecoin like MakerDAO too. What we do know though, the coin that makes itself most attractive to the mainstream customer will be the one that wins this race. To do this, the company running the stablecoin need to be honest, transparent and clear. Once this happens, mainstream investment will be inspired and this rise of stablecoins could eventually lead to something even more exciting - mainstream cryptocurrency adoption.
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