Stablecoins Taking Over?
Bitcoin is back below $7k. Sure, that information is not really headline material, considering that fact that it’s been this way since March 30, with occasional excursions above on April 2-3. Everybody is talking about the volatility of the cryptocurrency market. Exactly one month ago, the price of BTC was reaching new highs for 2018, fast approaching $12,000 for the first time since January. It was all down in January, mostly up throughout February, with a sharp down at the end of the month, then up again until March 5, followed by a net downwards trend up until now.
Even so, Bitcoin is still hanging on, likely looking at a rally over the next couple of weeks. Many altcoins will probably not be afforded the same luxury after being dragged through the mud for the entire first quarter. For example, Bitcoin Diamond lost 98%, now worth only $2.20 after dropping from $100 heights. Then you have Bitcoin Gold (now $45, previously $500+), Einsteinium (now $0.11, previously $2.83), and NEM (down by 89%, from $2.09 – $0.22, after the notorious Coincheck hack). Many other cryptos lost more than 80%, including Ripple, Cardano, Verge, Bytecoin and Digibyte.
All of this has investors worried, frantically looking for safe havens, investments with little to no risk as a way to hold on to their assets and weather the storm before potentially reinvesting into something that might bring in significant gains.
Enter stablecoins. You must have already heard about Tether and related controversies, and now there’s also TrueUSD kicking up dust. What is this? What is going on?
These stablecoins aim to bring stability to the cryptocurrency market and become a basic medium of exchange. Most of them have their value pegged to the US dollar. TrueUSD is looking to marry the decentralization of capital with the price stability of fiat currencies. Its backing in USD has been independently verified and users can redeem USD for TrueUSD – which is a first.
TrueUSD is looking to challenge Tether’s dominance when it comes to stablecoins, amid a number of controversies and close ties with Bitfinex, the major cryptocurrency exchange, which is allegedly issuing USDT to drive up the price of BTC.
TrueUSD first launched on Bittrex and promises to regularly publish attestation reports from Cohen & Co. to prove that each TrueUSD token on the market is collateralized by USD. On Bittrex, you can exchange TrueUSD (TUSD) for Bitcoin (BTC) and Ether. On March 30, Bittrex also introduced the Tether – TrueUSD pair, which many must have thought was an April Fool’s joke – since news outlets first caught wind of it on April 1. However, the pairing of the competing stablecoins gives traders a chance to avoid risk posed by Tether, which is more popular, and quickly exchange it for TrueUSD. They can then get their USD later if they choose to do so.
But TrueUSD is not the only challenger. There is also Saga, developed by the Saga Foundation, a Swiss non-profit. The Saga stablecoin’s reserve will be pegged to SDR, the special drawing rights of the International Monetary Fund. SDR is an international reserve asset created in 1969 to expand global trade.
Both Saga and TrueUSD will use smart contracts and comply with respective AML and KYC regulations.
Proponents of stablecoins hope that they will make cryptocurrencies in general more popular by instilling confidence, getting rid of volatility and allowing users to use cryptos for daily transactions without fear. The only question is whether crypto users will choose to trust stablecoins like Tether or whether they will trade off their anonymity and go for its more compliant competitors, which are quickly growing in number.