Mike Novogratz, a long-term Bitcoin and cryptocurrency proponent, had previously expressed the stable coins as a viable form of digital asset. His negative assessment for Tether USDT was due to poor PR work of the company, and it was not related to the any technological failure.
There is an immediate concern about how cryptocurrencies will respond with the increasing numbers of stable coins entering the market.
Stablecoins peg their value to an “extrinsic identifiable source.”
Several startup companies were marching towards the ERC-20 token model for the ICOs in the year 2017. Ever since early 2018, the stable coin model is becoming an attractive proposition. Investors are currently exhausted from the ongoing bear cycle, and they are resorting to stable coins.
When the price volatility of the traditional cryptocurrencies are seen, they have exhibited a great degree of fluctuation in the prices even during intra-day evaluation. Stable coins, as opposed to cryptocurrency, provide with excellent stability to investors and merchants who are willing to participate in the digital asset.
The stable coin industry has not yet matured. The model for pegging the stable coin is yet to evolve. Until this point, the value of the stable coin is variable.
Gold and precious metals are attractive options for stable coins. This is because rare metals and the greenbacks will not undergo a rapid price variation. This will permit the creation of a product that will combine the strengths of cryptocurrency via mobile wallets, fully digital assets, and secure platform via blockchain. This will, in turn, help buffer against the price volatility and fluctuating valuation on an hourly basis.
Tether’s USDT has a historic $1 valuation, and it is rarely down by 2 cents, which is a very small amount, provided the miniscule amount on the 90+ percent loss during the bearish trend in the Altcoin industry after the stable coin hit the all-time high in January. At the cost of missing on the gains that have appreciated, investors and holders get the most assurance over their digital asset. This proves true with Tether’s USDT as well.
Despite all, stable coins offer a very viable product for cryptocurrency and digital assets based transactions. There are still questions remaining around the decentralization factor for these coins, apart from their ability to retain their value, regardless of the tethering effect.
The projects continue to be decentralized, and when considered from the point of view of open source development and investment across the investment base, there is a quality of centralization happening, which can be compared to that of the fiat currency. For several investors, the most important aspect of having digital money is to free it from the influence of bureaucrats and their institutions.
The government will surely try to quash out unlimited tethering of some of the stablecoins to fiat in order to avoid a competitive alternative for their own tender.
Get the latest Crypto & Blockchain News in your inbox.