Cryptocurrency remains volatile, and stablecoins may provide the stabilization the market needs.
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While the cryptocurrency market is trying to find a bottom after losing over 80 percent of its value since its year-to-date peak, stablecoins are getting more attention thanks to their ability to store value and smooth volatility noises. Currently, stablecoins represent the fastest-growing market within the cryptocurrency space, with several major coins of this kind being launched in the last few months.
The payments industry is perhaps the key beneficiary of this emerging sub-market. Stablecoins enable merchants and consumers to rely on balanced prices that are not affected by the high volatility of the crypto market, as these coins are pegged to real-world assets, especially to the US dollar. Bitcoin was also designed as a secure and fair means of payment, but it has failed to bring utility in the context of payments. In the last few years, hundreds of new coins and tokens have been issued by various entities, but most of them have been prone to the same volatility risks.
Are stablecoins worth the hype?
Stablecoins are hybrid cryptocurrencies because they are blockchain-based units that are also backed by fiat currencies or commodities, which is why they provide the benefits of both crypto and fiat currencies. Thanks to their stability, stablecoins represent the ideal tool that can connect countless of internet and blockchain ecosystems with traditional economies. These coins help users streamline payments via automation while ensuring liquidity, security, and transparency.
Most of the blockchain ecosystems are still struggling to become more interconnected with traditional banking, but the latter seems to have tough barriers in many jurisdictions. To avoid the hardships caused by banks, crypto firms can rely on stablecoins.
This is also the recommendation of Malta’s Prime Minister Joseph Muscat, who recently spoke highly about stablecoins in a Lovin Malta article: “We’re obviously not going to intervene in banking policies because they have to deal with issues such as correspondent banking and risk assessments. Our job as a government is to create this new market and not allow a vacuum to form within it. Some platforms are already banking in cryptocurrencies and new sectors, such as stablecoins, are being set up that are being viewed as more secure.”
Judging by the potential impact they can bring to blockchain ecosystems, stablecoins are definitely worth the hype — at this time it’s not just about speculators.
USD-backed stablecoins are dominating this sector — you’ll find Tether’s USDT, Circle’s USDC, Paxos Standard Token or TUSD in the list of top cryptocurrencies by market cap. However, some firms choose to break the stereotypes and develop new forms of stablecoins that incorporate even more features.
The concept of smart money remains a topic of conversation, for example, as discussed by Coinbase chief operating officer Asiff Hijri, who recently said on Twitter at the Money 20/20 conference that, thanks to stablecoins, money became programmable for the first time in history. “[Stablecoins] will unlock the ability to create programmatic money applications like we have not seen before because now money is truly programmable,” the COO noted.
To substantiate the potential value of stablecoins, crypto exchange Binance just announced in rather breaking news fashion that Circle’s USD-pegged stablecoin USD Coin will now be listed on the exchange. It is a quote asset for several new trading pairs in its combined Stablecoin Market (USDⓈ) listing. The exchange announced this in an official post published in this article from the Binance support site.
Stablecoins are yet another mega-trend these days, and they pledge to disrupt the payments industry, ecommerce operations, salary and rent payments, wealth management and lending markets among others. So the future of money might belong to stablecoins, rather than cryptocurrencies as everyone has speculated.