Today I want to touch on the concept of stablecoin and its importance. Stablecoins are crypto-assets that maintain a stable value against a target price (e.g. USD/Gold)
There are a number of stablecoins in the market. These include :
True-USD(Rank-69,Marketcap of USD79m): TUSD Token is pegged against that of the US Dollar, however due to the low levels of liquidity; it experienced a price surge on external exchanges. True USD is collateralized by US Dollars which sit in legally protected escrow accounts.
Dai (Rank-101,Marketcap of USD47m): Dai is started by MakerDAO in early 2017 and proposed to peg to US dollar. However, it is not backed by USD like USDT or TUSD. Instead, it is backed by Ethereum. a classic example of crypto-collateralized stablecoins. The model has been criticized for being highly complex to be understood by other market players.
The Notorious Tether(‘USDT’)
The highest marketcap stablecoin and most notorious is Tether (Rank-8): Marketcap of USD2.8bn. It has been live since Feb15 and has tonnes of negative market reputation as below
Investigation by CFTC : USDT together with Bitfinex is under investigation by U.S. Commodity Futures Trading Commission seeking proof that Tether is backed by a reserve of U.S. dollars. Despite claims from their affiliated lawyers that Tether has more than USD2billion in their account, an underlying question is where does this USD2billion comes from? Who are the owners that contribute this USD2billion sitting on Tether bank account to secure the USD2billion USDT being issued
Market manipulation: In a report by academics, finance professor John Griffin mentioned that the analysis of tether issuance of new USDT showed a pattern of Bitcoin price support. First, USDT are created by the parent company Tether Ltd., often in large chunks. Almost all new coins then move to Bitfinex, he said. When Bitcoin prices drop soon after the issuance, USDT at Bitfinex and other exchanges are used to buy Bitcoin “in a coordinated way that drives the price,”
Pump and Dump: There is a tonne of conspiracy among USDT and the people behind it. This is a highly recommend read which demonstrated the conspiracy behind the lawyers, Tether, bank and auditors in helping to print billion of tethers, profiting from pumping and dumping and funnelling profits back to these stakeholders’ bank accounts. In fact brock pierce the man behind tether ends it nicely. I don’t care about money,” “If I need money, I just make a token.”
The hard truth
Without stablecoins like tether, you will never have an extreme bullish market that one have from Dec-Feb.
USDT is required as a form of hot money to pump the market up and to dump and exit the market quickly. This quick movement of funds only benefitted a few who have heavily colluded in the scheme of things.
This included Tether company, exchanges, ICO participants,VC funds and investors with insider news. Most crypto investors who have bought during the bull run would have contributed to the windfall of the privileged few and stuck with their position.
Notwithstanding, this move also bring Tether closer to the point of self-destruction as it further tarnishes its own reputation as a stablecoin. However, I guess Tether company would not care. This has been a windfall for Tether company and its owners like Brock Pierce. It is an analogy of getting as much milk as you can from a cow before it becomes dead.
The next bull run?
Tether’s bad reputation and slow demise is a market opportunity for others. The Winklevoss brothers has gotten New York state approval to issue their own stable coin Gemini dollars (GUSD).
Is this another tether in the making? Only time will tell. However, there is no denial that a stablecoin is required, if crypto were to reverse to bull market.
In the meantime, for those already invested, I wish you luck in bracing through this cold bitter winter before we see the spring. I sincerely hope the next bull run will benefit a larger group of investors rather than the colluded few.
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