Is Tether A Reliable Stablecoin Or Is It A High-risk Asset?

Is Tether A Reliable Stablecoin Or Is It A High-risk Asset?

Is Tether A Reliable Stablecoin Or Is It A High-risk Asset?

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@ anti-danilevsky Anti Danilevski Founder & CEO at Kick Ecosystem. Crowdfunding & Blockchain evangelist since 2009

It’s no secret that most traders seek to lock in their profits, but due to the high volatility of cryptocurrencies, this has been quite problematic to do. This is because users need to exchange their cryptocurrency assets for fiat currency to pay for various goods and services and to trade on the market.

Doing this without involving fiat currency and constant withdrawals is quite troublesome. Stable-coins, crypto-assets that help lock profits at a ratio of about 1:1 to major fiat currencies, have come to save the market.

One of the most in-demand and popular cryptocurrencies on the market is USDT (Tether).

Small backstory

USDT cannot be mined, and there is no limit to the tokens that can be issued. According to the founders, this is made possible because the cryptocurrency is secured by real assets.

It is this fact that raises the most doubts in the cryptocurrency community. This skepticism is also reinforced by the absence of a third-party audit of the company.

At the same time, on its official website Tether states that USDT is not money and they have no real price, and the company does not have to guarantee the value and security of each token.

Also, the company has no obligation to return USDT to users and reserves the right to refuse service and compensate users who violate the user agreement. If Tether goes bankrupt, alarmists caution, no one will return funds to users.

Nevertheless, the founders have repeatedly assured that they do not pass third-party audits only to maintain commercial secrecy, and the official project website regularly publishes reports on the security of the coin with real assets.

Another complaint against Tether is considered to be its centralization. A number of experts believe that this can lead to uncontrolled monetary emission. But if we consider USDT a hybrid of both cryptocurrency and fiat, its centralization is more likely to demonstrate its similarity to conventional fiat institutions.

Is Tether as scary as they make it out to be?

It is also worth noting that despite the skeptical statements towards Tether, the share of Tether on the market, from 2017 to 2020, exceeded 70%!

This indicates both a great market need for this kind of asset, as well as user confidence in this stablecoin. Let’s imagine, though, that USDT is actually not backed by anything.

Is it really that scary and threatening for the cryptocurrency to collapse drastically and lose a lot of money? We should start with the fact that fiat money should not appear out of thin air either; every ruble, dollar, euro and other state currency should be secured by foreign exchange reserves.

However, both because of the political situation and because of a number of other factors, no audit has been made for quite some time, and no global collapse has yet occurred because of this. It is doubtful that every fiat unit in the world is really backed by gold.

People have just come to a consensus and the market accepts it, so the question of whether this or that currency is backed by gold hasn’t been raised for a long time.

Public consensus is what many currencies are based on. The public demand for purchasing and storing Bitcoin can also explain its current solid price, along with some other currencies. We should also consider the growing interest in USDT from institutional investors, who never invest in high-risk assets.

Therefore, the likelihood of a stablecoin collapse is currently minimal.

How can the risks be minimized?

While trading, nevertheless, one should take into account the market conditions and not “put all their eggs in one basket”.

The key to success for any trader is asset diversification and systematic control over them. USDT is an indispensable tool for locking in profits and withdrawing funds, but you should at least keep some of your assets in good old Bitcoin.

It is also worth keeping an eye on the fiat dollar rate when deciding to commit profits to this altcoin. After all, it would be a shame to lose profit because of yet another witty statement made by some Twitter politician.

But in any case, USDT is one of the best stablecoins on the market and has no equivalents, and we hear various theories on the possible collapse of various altcoins every day.

In order to stay up-to-date on the latest cryptocurrency rate trends and forecasts, sign up and get reliable information from KickEX.com every week!

(Disclaimer: The author is the CEO at KickEX)

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Morgan Beller says stablecoin project Celo is like ‘Venmo for crypto’

Morgan Beller, a former co-creator of Libra — now known as Diem — has joined the stablecoin project Celo as an advisor.

Beller quit Diem last September and joined venture capital firm NFX as a general partner. In her advisory role at Celo, Beller aims to help the project on initiatives like adoption and developer strategies, she told The Block in an interview.

“I love Celo’s mobile-first global approach,” Beller told The Block. “It’s really like Venmo for crypto.”

Venmo is a mobile payment service owned by PayPal and allows people to transfer funds within the U.S. Celo, on the other hand, helps users share Celo dollars (cUSD), each pegged to track one U.S. dollar.

Celo is a decentralized stablecoin project focused on payments as a use case, especially for the unbanked and underbanked communities. The project was launched in March last year and helps exchange money via a mobile phone. According to Coinbase, the Celo Dollar possess a market capitalization of around $33 million, with roughly $104,000 in volume during the past 24 hours.

Beller’s new advisory role comes as the ecosystem for stablecoins — and the outstanding supply of said coins — continues to grow. It remains an ecosystem dominated by USDT, the stablecoin issued by Tether, though stablecoins such as USDC, BUSD and DAI have expanded their market share.

The conversation around privately-issued stablecoins arguably exploded into public view when the now-renamed Libra made its public debut. Introduced in June 2019 and backed by Facebook and other firms, Diem has yet to launch, having faced significant regulatory scrutiny in the wake of its unveiling. The project has since revised its initial approach, brought in a range of traditional finance veterans to guide the association that oversees its development, and, to some extent, turned its gaze to the nascent world of central bank digital currencies, or CBDCs (Beller declined to talk about the project in the interview).

‘Grasroots stablecoin movement’

The potential for stablecoins to solve real problems for people is what attracts Beller to the industry the most, Beller said. That includes people in countries where their national currencies suffer from “tremendous inflation,” and are a “terrible store value,” as well as jurisdictions in which governments can seize accounts and the money inside them, said Beller.

Beller said she sees Celo more than Venmo for crypto because beyond just sending and receiving funds, it also acts as a “store of value.” “It’s giving them a savings account, and it’s giving them security,” she said.

Still, most stablecoins today are used for trading arbitrage, said Beller.

“So it’s in the hands of a few people, but really big volumes, so this is like top-down. I see Celo really as the bottom-up, grassroots stablecoin movement where it’s small balances by a lot of people.”

Stablecoin growth and looking ahead

Beller also spoke to the general timing of the emergence of stablecoin platforms like Celo and the broader global context within which this growth is occurring.

“I think that their timing was a blessing to the people who need it the most and that we’re in a global pandemic, remittances are very expensive, both as far as cost and as far as time is considered,” said Beller. “So Celo has been helping people send remittances for less than one cent fees during the pandemic, which you know, it gives you goosebumps.”

Looking ahead, Beller said that “Celo has big future plans, really big plans,” though she did not disclose specific details. In the interview, she highlighted a new euro-pegged stablecoin that Celo is planning to launch.

Both Diem and Celo have some common investors, like Andreessen Horowitz (a16z) and Coinbase Ventures. Beller previously worked for a16z.

When asked if NFX has invested in or has plans to invest in Celo, Beller said since NFX invests in early-stage startups, Celo is “just outside of the investment criteria of the fund.”

Credit Card Companies Should Offer Stablecoin Payments or Be Left Behind: Gartner

Centralized payment companies such as Visa, Mastercard and PayPal will need to adapt if they are to survive the potential demand for blockchain-based stablecoin payments, according to research firm Gartner.

In a Thursday blog post, Gartner notes that, while new bitcoin (BTC) offerings from such firms are helping to prepare the transition to a future payment infrastructure, their revenue is based on charging transaction fees for clearing and settlement.

The fee strategy, which sit at odds with blockchain’s peer-to-peer model, could be the very thing that sees these firms fall behind the competition from stablecoin payment networks, per the post penned by Avivah Litan, distinguished VP analyst at Gartner.

Litan described such firms as “centralized decentralized finance” (CeDeFi) – in which centralized, mainstream firms with big bitcoin holdings bring innovation to the DeFi space and, conversely, adopt DeFi’s biggest apps.

But Litan points out that customers of these types of services are likely wondering if they will be obliged to pay centralized service fees for moving their cryptocurrency along the blockchain in the near future, defeating the technology’s initial promise.

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“Companies we speak to are justifiably skeptical of these services,” Litan wrote. “After all, the revolution of blockchain payments is that they execute peer-to-peer and eliminate central intermediaries and associated bank fees.”

However, the author added Gartner has yet to see a range of offerings from the crypto space for viable stablecoin payments, pointing to a lack of easily accessible applications and fees lower than are currently on offer from card networks or firms like Square and PayPal.

Litan said there’s potential for card firms to provide a range of as-yet-unseen offerings, such as transparent real-time stablecoin payments on the blockchain tied to underlying information regarding a given transaction, and protections for funds backing stablecoin sitting in partner bank accounts.

Card companies could provide the gateways for payors and payees and add functionality, according to the post.

“The card brands could still earn revenues from on and off ramp value-added services, and from interest on the reserves underlying the stablecoins,” Litan said.

By 2022, CeDeFi could be ready for enterprise adoption if the regulatory guidance is present, the research analyst predicted.

But, should the legacy payment companies fail to keep pace with the likes of fiat on/off ramps, such as fast-moving cryptocurrency exchanges like Binance and Gemini, other firms are going to step forward.