Stablecoins Set to Disrupt the Crypto Market: Short Stablecoins Review

by Albert Kim
Stablecoins Set to Disrupt the Crypto Market: Short Stablecoins Review

The stablecoins’ hype appears unending, and investors and crypto lovers are opting for these coins. With cryptocurrencies headed towards mainstream adoption, the wild volatility has been an issue in the digital money market. However, the entry of a new breed of virtual coins appears to be the trend. Stablecoins by design are meant to reduce crypto volatility and make digital currencies usability seamless.

For one, stablecoins are seen by merchants as the meeting point between the crypto and fiat economies. The current invasion in the market by these types of digital coins is expected to disrupt the crypto verse. These coins are pegged on the value of other assets, fiat, or even precious stones.

Growing Stablecoin Choices

Crypto users have seen virtual coins as a form of investment, but with the growing use cases, this perception has changed, and it is clear that crypto is the future of money and that was Satoshi Nakamoto’s vision. The entry of stablecoins in the market has seen increased confidence in the blockchain. Below are some of the stablecoins that are getting popular by the day:

True USD Coin

Real USD, launched in 2018, is a one to one stable currency which is paged on the USD. The coin eliminates the function of a centralized trust fund and third parties. This has become very popular among institutional investors with the price staying stable with a deviation of $0.02. The coin has over 6.6 followers in its social accounts.

Digix Gold Token (DGX)

As the name suggests, the coin is paged on gold and has become very popular as the blockchain gold. A single token represents one gold gram. The currency has been in the market since 2016. As an asset-backed coin, the price stability has seen a fluctuation of 25% since launch and has a following of over 15 thousand.

Tether (USDT)

Tether is one of the most popular stablecoins and its high value and pegged on the green buck. It is also the most reliable coin in the market today. Launched in 2015, it has a social following of 27.4k. It is backed by a team of experts in retail and Fintech, and its stability average is $0.05. However, the firm behind Tether has been questioned about its accounting practices.

Tether surprised many in April when it hit its all-time high in terms of daily transactions according to CoinMarketCap. Many observers say the stablecoin is giving Bitcoin a run for its money with a trading volume of $9.4billion against that of BTC at $10.2billion.

Read also: The Vostok Private Blockchain Platform for Enterprises and Governments Went Live

AAA Reserves Stablecoin

AAA Reserves is a different kind of stablecoin in that it is backed by a wide range of investment products and currencies. It entered the crypto sphere in 2018 and appears to be eating into the Tether market. The beauty of the coin is its price stability as a result of the diverse underlying portfolio.

JPM Coin

The JPM Coin is the latest entrant into the crypto market and targets the JPMorgan corporate clients to enable them to make instant payments using the JPM blockchain. The coin is in the beta stage and being tested by select institutional clients through partner banks. Each coin Collateralized and is worth $1 and pegged to the USD

Gaps that Stablecoins are filling

By design, stablecoins are meant to stem the inherent crypto volatility through collateralization, which means the number of coins in circulation is reserve asset-based, and these assets are stored in reserve. If there are 1,000 YEN paged stablecoins circulating, the same amount should be in a bank somewhere.

The crypto market is prone to crashing and gaining, and this is where the stablecoins come in. They give the investor added confidence in the market conversion rates. This increases the crypto usability and makes it more practical when purchasing goods and services.

The on-chain spend-ability of stablecons is on the rise. By December last year, on-chain transactions rose to $5billion in just three months. In November alone, the niche grew by 1,032% compared to the previous two months. This growth was recorded for only four significant stablecoins.

How Do Stablecoins Work?

Stablecoins are specifically designed to offer a consistent price or value proposition. They act as a bridge between fiat money and the crypto decentralized virtual currencies. What’s more, they act as enablers and used as collateral in acquiring loans as they absorb the risks associated with crypto.

This partly explains why employers who pay their workers in virtual currencies prefer using stablecoins whose prices do not experience huge loses of gains when the crypto market crashes suddenly.  At the moment, there are three types of stablecoins.

There are those coins that use fiat as collateral; for every coin in the market, there is the same number of coins in a reserve bank. These are easy to exchange without any risks of being hit by the volatility associated with virtual currencies.

The second type of stablecoins is that use crypto as collateral where the reserves absorb the volatility. In this case, one stable coin is covered by crypto worth two. The risk behind this is the enormous amount of crypto used to back the stablecoin.

The last type of stable coin is one that does not require collateral and instead rides on smart contracts that monitor the market demand and total supply. This way, their prices are kept in tandem with the fiat or asset they are pegged on.

Why the Stablecoins Popularity

There has been a lot of uncertainty in the crypto sphere more so when it comes to crypto conversions. This new breed of virtual currencies offers a predictable asset that is similar to traditional coins. They have proved beneficial in fighting hyperinflation in Venezuela, and their use cases are on the rise, and merchants are embracing them at an alarming pace.

Crypto investors find stablecoins the ultimate safe have to stow away their assets they offer a reliable and trustworthy exit avenue from the real and unpaged cryptocurrencies. With stablecoins, you have peace of mind since you are cushioned should the market decide to head south the drop and gain margins are minimal; this makes conversions less expensive when exiting crypto to fiat.

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