Stablecoins are a type of cryptocurrency whose value is tied to fiat money or precious metals. Most often, stablecoins are pegged to the US dollar, at the rate of 1 asset = 1 dollar.
Stablecoins are used by cryptocurrency exchanges to quickly and cheaply transfer large amounts of dollars to each other, without the need to use a banking system. There, the fees for such transactions would be significantly higher.
How did stablecoins come about?
The controversial issue that arose since the advent of bitcoin 10 years ago about whether electronic or virtual money can compete with traditional types of currencies can already be said with full confidence that it has been decided in favor of the latter.
This is evidenced by the almost avalanche-like appearance of many cryptocurrency exchanges, crypto exchangers, payment services, blockchain start-ups, and even the spread of cryptocurrency ATMs. Moreover, many corporations, banks, world-famous investment funds are feverishly introducing departments for working with the blockchain , hiring hastily specialists.
However, in spite of such impressive prospects for cryptocurrencies, they still have a number of disadvantages, one of which is high volatility. Those. rapid and strong change in course over a period of time. This creates serious difficulties when using crypto as a means of payment – “here and now”.
One of the attempts to solve such a problem is to create some hybrid cryptocurrencies that serve as a cross between the usual fiat money and pure cryptocurrencies – stablecoins. This interesting innovation in the world of cryptocurrency will be discussed in this article.
What is stablecoin?
There is no exact or official definition of what stablecoin is (hereinafter referred to as SK) (from the English stable – stable, fixed). As a basis, you can take the definition that exists in such reputable financial analytical publications as Bloomerg.
Stablecoin refers to a cryptocurrency asset whose current value is provided by one of the traditional and liquid types of assets – currency, commodity values, i.e. assets accepted in world financial practice, as a reliable and legal means of calculation.
The main task of stablecoin is to smooth out the cryptocurrency volatility, due to the fact that its price (market value on the market) is “tied” to the price of, for example, the US dollar, Swiss franc or gold.
Here the analogy of what was before 1973, when both the American dollar and even the Soviet ruble were provided with full-weight gold, had a "gold standard" is quite appropriate. Using this practice implies the following benefits of stablecoins:
- the predicted cryptocurrency rate, which allows you to make payments even on long-term contracts between counterparties;
- insurance against a sharp depreciation of cryptocurrency, especially when insiders use information manipulative technologies;
- the possibility of using asset-protected crypts as a means of accumulation and reservation;
With all the advantages of such a solution to the problem of volatility, any SC has one big drawback. The fact is that the percentage of security or liquidity of the UK will be determined by the one who issued it. Those. stablecoin cannot solve the problem of rate manipulation by the issuer.
That is why so far, Bitcoin remains a reliable means of saving, or as it is called "digital gold." It is a fully decentralized crypto, no one can manipulate its course, depreciate, print more or lower the percentage of security with something valuable.
Types of stablecoins
The cryptocurrency market has just begun to conquer the global financial space and you should be prepared for the fact that a huge number of cryptocurrencies, types, varieties will appear.
As for the UK, the following classification is currently used, which is used in the practice of digital coins.
Secured by fiat currencies
Such stablecoins mainly work according to the scheme, when the number of issued digital coins is equal to the amount of real, reliable money used to secure it. For these purposes, the US dollar is still mainly used – the most reliable international means of payment. However, there are already attempts to make a UK based on other world currencies.
In particular, China has plans to make a crypto secured by the renminbi by 2021. Despite such a positive moment, all these fiatable stablecoins have the following limitations:
- IC carries those exchange rate risks as the currency, which serves as a means of ensuring it,
- not all payment systems, including cryptocurrency, can accept or service this type of IC
- there is a real risk of manipulating the course, since no one knows for sure how many dollars or other fiat will be used to provide IC (the problem of decentralization). The most used fiat-based ICs are TrueUSD (TUSD), USD Tether (USDT), USD Coin (USDC), Paxos Standard (PAX), Gemini Dollar (GUSD), Bitcoin Air (USDAP)
Secured by cryptocurrency
This is a cryptocurrency where a more reliable and liquid digital instrument is used as the underlying asset. It is generally used primarily to provide bitcoin, ripple and ether. Sometimes it is practiced to bind SK to the “basket” of cryptocurrencies.
This option does not particularly solve the problem of the volatility of the course, but it increases the degree of user confidence in this digital coin. An example from SC practice is “DAI” provided by Ethereum (ETN) .
Such stablecoins are relatively rare when used in practice calculations. The main task of those who issue such coins is to earn additional income in the form of Seigniorage. Those. income received by the cryptocurrency issuer from the fact that its users carry out all payments only through the payment servers of the crypto owner, paying him a percentage of the commission.
This model was initially widely used in the primary cryptocurrency offering market ICO, which peaked in mid-2016 and late 2017.
The main difference between unsecured ICs and other altcoins is that the issuer maintains a certain level of liquidity in the payment system, periodically neutralizing jumps in the IC rate.
Stablecoins market overview
Despite its relative youth, the UK market for the period from 2018 to mid-2019 showed impressive dynamics. So, during this time more than 200 new ICs and blockchain projects appeared on the market using this crypto format.
The distribution of SK shares by types of assets used as collateral is presented in the figure above.
The leading position in the market of derivatives of cryptocurrencies of the UK is occupied by Tether, with a dominance of 75%.
The trading volume of major types of ICs is still small and reaches $ 120 billion at the moment. But the dynamics so far remains upward and, as demand for crypto assets grows, in view of, for example, the impending powerful economic crisis, the growth rate of IC usage will take an exponential form.
TOP 5 stablecoins, list for 2019
Digital coins that comply with the SK standard and have direct practical application are:
- Tether (USDT) is the absolute leader in the stablecoin market in terms of issued funds and daily transactions.
- True USD – as the developers say, the liquidity of this token is provided in a ratio of 1 to 1. This is, like, a digitized US dollar.
- USD Coin – used for trading on Coinbase and Circle cryptocurrency exchanges
- Gemini USD – used in trading on the cryptocurrency exchange of the same name
- PAX – Paxos Standard Token. It is used for settlements on the Binance and Okex trading platforms.
Important figures are stability and liquidity.
From the point of view of today's user, two factors are critically important for stablecoin: stability and liquidity.
- Stability – an indicator of how much the coin deviates from the target price ($ 1),
- Liquidity, however, shows how many coins can be bought or sold without significant impact on the market, or the cost of slippage.
Stability can be approximated by various indicators of, although in the case of stablecoins it will be more accurate to talk about price emissions rather than standard deviation, liquidity can be judged by the volume of trades – the larger the volume of transactions, the cheaper each of them will cost.
If you measure this parameter more accurately, you need to take an order book and see how much you can sell or buy instantly within a given slippage range (say, 1%).
In practice, these two factors correlate: the greater the liquidity of the stablekion, the less susceptible it is to short-term price spikes. And for these two factors – stability and liquidity – so far no one is even close to catching up with Tether.
I have included market capitalization in the table because it is a number that interests many – but it can be deceiving. For example, although Dai's market capitalization is approximately equal to that of TrueUSD, the former is much less liquid.
Below you can see that the TUSD / USDT pair on Binance is incredibly liquid – with several million dollars of cash liquidity available within a 1 percent price deviation.
I do not consider these liquidity figures directly for TUSD, since most people are interested in trading stablecoins for BTC or ETH, and not among themselves.
If a coin is used as a carrier of value (NS), we expect a high market capitalization from it – a coin costs more than dollars. If this is a medium of exchange (CO), we can talk more about volume – a lot of coins are sold.
I included in the table included a measure of the speed of money, calculated as the average daily volume / market capitalization. For Tether, this parameter is incredibly high (this is an annual rate of more than 300, for comparison, for M1 dollars – all dollars, except for bank reserves, – about 6), which indicates that cryptocurrency is used mainly as a medium of exchange, and can also be an indicator that people actively avoid storing capital in Tether.
Prospects for the use of stablecoins in the future
Regarding the prospects for using ICs as a means of calculating and storing assets, specialists have many points of view. But the fact remains that as more and more financial transactions and transactions, especially international ones, go into the crypto space, the demand for a certain stable cryptocurrency standard will grow more and more. Many cryptocurrencies with the status of the UK are already claiming this role. The flagship is no doubt USDT.
In addition, it should not be discounted that the competition in the cryptocurrency market will only increase and at any time another initiative can intercept the initiative, for example, the Facebook developed cryptocurrency Libra.
Cryptocurrencies created specifically for mutual settlements, for example Ripple (XRP) and Stellar (XLM), can significantly move SK from this market. It is believed that they can be used as a cryptocurrency standard recognized by states, the IMF and world payment systems such as Visa and Master Card.
Publication date 08/16/2019
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Media: 97% of cryptocurrency exchanges in South Korea are on the verge of bankruptcy
Low trading volumes jeopardize the continued existence of the vast majority of South Korean cryptocurrency exchanges, as well as forcing local startups to look for ways to list their coins on foreign sites, according to Business Korea. In particular, the publication draws attention to the fact that only five South Korean sites are today in the first hundred exchanges in terms of trading volume. “It is no exaggeration to say that because of the low […]
Low trading volumes jeopardize the continued existence of the vast majority of South Korean cryptocurrency exchanges, as well as forcing local startups to look for ways to list their coins on foreign sites, according to Business Korea .
In particular, the publication draws attention to the fact that only five South Korean sites are today in the first hundred exchanges in terms of trading volume.
“It is not an exaggeration to say that due to the low volume of transactions, 97% of local exchanges are on the verge of bankruptcy, ” the article says.
Despite the fact that the publication does not cite data that supported its statement, at least one South Korean exchange – Coinnest – has already closed this year. However, the circumstances of the incident are still in question. So, in an interview with CoinDesk Korea , Coinnest representatives said that the closure of the exchange was "a natural result of a decrease in trading volumes", and also mentioned "regulatory problems and business solutions."
At the same time, as BlockchainJournal wrote , it is possible that Coinnest could take such a step because of the prosecution of exchange leaders who were accused of receiving a bribe in exchange for cryptocurrency listing last year.
Be that as it may, one cannot argue with the fact of low trading volumes on South Korean exchanges. And it is precisely this factor that is supposed to be forcing an increasing number of local cryptocurrency startups to be hosted on foreign platforms. And the latter, apparently, do not intend to miss this opportunity.
So, according to the publication, Binance Labs and the BW.com exchange show particular interest in South Korean projects. The first is actively attracting local blockchain startups to its accelerator, while the second has already flipped coins from projects such as Ziktalk, Storichain, Payexpress and Sigma Chain, and intends to open fiat markets in pairs with the South Korean won by the end of the month.
Other “difficult market conditions for local cryptocurrency exchanges” are also called, supposedly forcing projects to look for listing opportunities abroad, including the big problems with making deposits and withdrawing funds in fiat that investors face.
In addition, 200 small exchanges cannot open verified virtual accounts, which deprives investors of any protection.
According to the publication, the current landscape of the cryptocurrency market in South Korea is noticeably different from the picture that could be observed in late 2017 and early 2018. For example, in December 2017, this Asian country accounted for about 20% of the global trading volume of bitcoin, and cryptomania reached such a high level that Prime Minister Lee Nak Yong even called it “a serious pathological phenomenon.”
Earlier in August, it became known that the South Korean authorities will tighten control over local cryptocurrency exchanges, expanding the powers of the Financial Services Commission (FSC). In particular, the FSC unit, previously engaged in the preparation of recommendations for working with exchanges for banks, will now directly control trading platforms. Also, a licensing system for exchanges will be introduced in the country in accordance with the recommendations of the Financial Action Task Force on Money Laundering (FATF).
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Binance plans to introduce an “independent, regional version of Libra” – Venus project
The world's largest cryptocurrency exchange Binance plans to introduce the Venus project, which, according to reports from the company, will be an independent, regional version of Libra.
Binance explains that the decision to issue Venus was formed because the company provides its services to customers from several countries, it has its own blockchain – Binance Chain, as well as the desire to destroy the “financial hegemony” and change the global financial system.
Yee Hye, co-founder of the Binance crypto exchange, noted that the crypto exchange team believes that in the future stablecoins will replace traditional fiat money in countries around the globe, forming a new standard for the digital economy.
Venus is an open blockchain project aimed at developing “local stablecoins” and digital assets whose value is supported by fiat currencies. According to the company, Venus will not have such problems with regulators as Libra, since Binance has already found a common language with regulators around the world. Binance offers its partners technical support, access to a risk management system, and regulatory support.
Investing in cryptocurrency 2019: risks and prospects. Investment Options
The cryptocurrency market is becoming more attractive not only in terms of making it convenient, safe and fast to carry out any financial operations around the world, but also because you can make good money by investing in cryptocurrency tokens.
Those who managed to overcome the fear of the new and bought bitcoin not even for 1 dollar, but at least for 10, 100 and even 500 dollars, now quietly live in their own houses, villas or islands.
Can I earn on investments in crypto now? It's not too late – is it done now? Has all this turned into another hype, tulip mania or the Ponzi pyramid?
The Mining-Cryptocurrency.ru portal has prepared for you material about what methods of investing in crypto exist and how best to do it.
How to choose a cryptocurrency asset for investment?
In order to choose cryptocurrency as a means of investment, you need to keep in mind two very fundamental points. The first point is related to the fact that there are no exact, universal methods by which one could unambiguously determine or predict the profitability of a particular cryptocurrency asset.
In general, investing is mostly creative, almost intuitive and subjective. As the famous investor Warren Buffett once said that if the books had exactly written how to invest and how to make money, then the richest people on Earth would be librarians.
The second point is related to the fact that the methods used in investment practice and trading for the financial analysis of investment assets, such as risk-return ratio, RE ratio, beta ratios, Fibonacci levels, technical analysis and Elliot waves, practically do not work on the crypto market.
Therefore, the most optimal set of tools or criteria by which you can somehow determine the suitable cryptocurrency asset in order to invest money in it is as follows:
- degree of liquidity , i.e. the volume and amount of coins issued, the volume of trading in them or the capitalization of the token must be at least at least 500 million – 1 billion dollars;
- listing on a cryptocurrency exchange , i.e. the token must, at a minimum, be traded on an officially existing trading platform where it can be bought, sold, exchanged for other tokens.
- there are exchange rates with fiat money , i.e. crypto can be exchanged for paper money or other common assets.
- the issuer or organization that issued the token has an officially registered status, publishes its financial statements
- the crypt chosen for investment should have an upward trend for at least the last two years , i.e. the chart of such a cryptocurrency should have a positive slope to the abscissa axis at an angle of at least 10% and at the same time not grow exponentially, have a slope of no more than 45%.
To these basic criteria, you can add a ton of some minor parameters. but basically it all comes down to the fact that the crypt chosen for investment should be demanded by the market, regularly traded on it and it could be withdrawn to your wallet or exchanged for fiat money. All other cryptocurrencies that do not fit the specified criteria are commonly called “shitcoins” on the market, which in fact does not even need further commenting.
What cryptocurrency to invest in 2019?
Of all the liquid cryptocurrencies at the moment, the most promising is the XRP token from Ripple.
Why is this crypto most suitable for both those who invest money for a relatively short period of time (up to 1 year), and those who prefer to be a long-term investor or scammer.
The following criteria and parameters are attractive:
- The XRP token is not just a cryptocurrency, but a digital asset that is actively used for interbank settlements in some payment systems (for example, MoneyGram). In particular, this crypto is now used by more than 200 financial organizations, banks, including the largest Japanese financial holding SBI, combining more than 60 banks, insurance companies, investment houses, etc.
- Past indicators of price dynamics, namely, the growth of the token by 40,000% in 2017, have a clear tendency to repeat with the target value of the token up to $ 50 in the future 2020 – 2021.
- Ripple has the third place by capitalization and liquidity in the general list of cryptocurrencies actively traded on cryptocurrency exchanges.
- The protocol used in the Ripple ecosystem for conducting financial transactions (DLP) provides the most minimal payment period – 3-4 seconds. For comparison, calculations using Bitcoin require 3-4 hours in order for payment confirmation to pass in at least 12 blocks.
In addition, Ripple's advantage over many other crypts can be attributed to the fact that there is certain information – Ripple and its payment services will be used as an international cryptocurrency standard.
TOP 5 most promising cryptocurrencies for investment
Out of the entire variety of cryptocurrencies available for investment, you can use only the first two to three dozen tokens of the largest projects .
The list of the top investment tokens is as follows :
How to invest in cryptocurrency?
Of all the available options for investing in crypto for an ordinary person, a layman in the field of information technology and finance, the most simple and preferred are three proven methods:
- Cloud mining . In a general sense, mining is the extraction or receipt of a crypto as a reward from the token ecosystem for participating in transactions using equipment and energy costs. To do this, you can purchase both your personal digital equipment (farm) and use the equipment of others, i.e. remotely or via cloud technology. The logic of the cloud mining process is simple – an investor concludes an agreement (registers on the site) with a mining operator that has the appropriate mining capabilities. By participating in the overall mining process , each investor receives his share of the profit in proportion to the money invested. The profitability of cloud mining in comparison with conventional (hardware) mining almost always turns out to be higher and more profitable for you.
- Cryptoexchange . This investment option involves the purchase of cryptocurrency on special trading platforms – cryptocurrency exchanges. To do this, it is enough to register on the exchange website, enter some personal data, payment details, transfer money. Investing through the exchange is usually effective in forming an investment portfolio consisting of several cryptocurrencies.
- Cryptocurrency exchangers . The main purpose of the existence and meaning of the cryptocurrency exchange business is to serve as an intermediary in the exchange of cryptocurrency for fiat money and vice versa. To create a crypto-exchanger there is no need to create a company, register it. For this, virtual exchange platforms are usually used in the form of a website whose domain name is registered in offshore jurisdiction. Cryptocurrency exchange commission varies from 1% to 15% of the exchange amount. This investment method requires some training in information technology.
Advantages and disadvantages of cryptocurrency investments
Investments in cryptocurrency instruments, like any investments in financial assets, such as stocks and bonds, are fraught with risk. However, this is so far the only thing that combines these two formats of investing money. By and large, crypto, as an innovative asset, has such advantages as:
- the ability to conduct almost instant financial transactions throughout the planet and in any amount (scalability). On average, it takes 3-4 seconds to transfer money in the ripple ecosystem (Coil, Xrapid, xCurrent).
For comparison, to make a regular bank international transfer between the owner’s own accounts, you will have to spend at least 3-4 days. This property of crypto being part of practical use in the financial system or use-case is one of the main attractive points of investing in digital assets.
- In second place after the demand for crypto, as a real financial payment instrument, is profitability. Naturally, while the crypto market is at its initial stage of development, institutional investors should be expected to come to this segment. Then, those impressive rates of bitcoin or XRP growth of thousands of percent in 2017 will seem like childish fun. For, for example, the daily volume of financial transactions in the world is about 8 -12 trillion. dollars. It is easy to imagine what will happen if at least 50% of this liquidity goes into cryptocurrency payment systems. Therefore, it is not in vain among cryptocurrency investors that there are rumors that soon Bitcoin will cost at least $ 100-250 thousand, and the Ripple token so unloved by haters all over the world will finally go in the direction of the tuzemun, delighting its loyal hodlers with a 50 bar – 100 dollars.
- the third place of honor in the attractiveness of investing in crypto is the relative reliability of asset storage, despite the fact that scandals periodically arise about the theft of bitcoins and other cryptocurrencies from one or another exchange. The blockchain system is designed in such a way that it is impossible to withdraw an asset without instantly displaying a hacking attempt along the entire transaction chain, recorded in hundreds of thousands of computers.
- anonymity. In general, blockchain transactions in cryptocurrency systems provide anonymity protocol for financial transactions. This does not mean that this method serves as a good way of concealing and laundering criminal money. This, first of all, speaks about the security of the investor’s personal information, since, in essence, there is no banking secrecy in the world, from the word at all. It is enough to recall the recent scandals with Cypriot and Swiss banks, the “Panama dossier”, which were ready to provide any information on their customers.
Having listed all these obvious advantages, you still can not ignore such an important advantage of investing in a crypt as elementary convenience. You can invest money, withdraw it, send it to anywhere in the world, there is no need to store assets in safes and bank cells. Those. investor money is always with him, he always has access to them, and their safety is guaranteed.
Among the disadvantages of investing in a crypto, one thing should be taken only – this is still a poorly developed infrastructure that allows fully using the crypto as a legal tender. This is the lack of full-fledged payment systems, normal cashing systems. This also includes the desire of states to take control of this tool, which guarantees everyone, without exception, real financial freedom, in return for the financial slavery that the outdated usurious (credit) banking currency system has been offering for hundreds of years.
Publication date 08/19/2019
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