Cryptocurrency, Stablecoins–The last two weeks have been a tumultuous time for cryptocurrency investors and advocates, who have watched the market capitalization of the industry fall by $90 billion, or nearly half of its valuation since the start of the month. However, some optimism is growing in the space as the committed developers and future-seekers for the technology shun the daily obsession over price changes and focus on new adoption.
Stablecoins, made popular by Tether’s USDT currency, have been a growing subfield within cryptocurrency as a natural outlet for investors and developers frustrated with the extreme price volatility of BTC and the likes of altcoins.
While Tether, which has minted $1.83 billion worth of USDT, appeared to have the market cornered only just a year ago, the company has given way to competition over scandals related to its bank holding and dealings with exchange Bitfinex. Instead of being the go to currency for those looking to transact in a more stable digital asset, a new crop of stablecoins with a variety of valuation-pegging have drawn the interest of investors and project developers.
On Nov. 27th, Bloomberg published an article titled Where to Invest $1 Million Right Now. Amongst the experts surveyed, one suggested the profit to be found in a gold-backed stablecoin, giving some much needed exposure to cryptocurrency in a time of otherwise dire price movement.
Speaking with the publication, Darrin Woo–the director of Woo Hon Fai Group–explained his belief in the physicality of gold, and how digital assets such as crypto-based stablecoins provide new innovation for transacting in the precious metal,
“Because of my family background—my grandfather founded Lee Cheong Gold Dealers in Hong Kong in 1950—I believe in the physicality of gold. I would buy a million dollars’ worth of bullion bars and stuff them under my mattress. Gold has underperformed the S&P 500 index for the past five years…In the next 10 years gold is one of the best contrarian plays. I say buy when no one else does.”
Woo goes on to include the rise of digital tokens entering the space of gold, highlighting a project he has recently invested in called G-Coin. As opposed to Tether, which is supposed to be backed 1:1 with U.S. dollars–and therefore at the mercy of inflation/volatility associated with the currency–G-Coin is a stablecoin backed by the price of gold. While investors are exposed to some volatility in the form of the precious metal marketplace, they also have the ability to benefit from price appreciation in the sector, a feature that tends to be lacking as a digital investment for most stablecoins.
“If you talk to millennials, they aren’t interested in buying stocks and don’t even have brokerage accounts, and they can’t afford real estate. So they are looking for a store of value that’s also convenient. They are interested in new technology and blockchain and using a digital wallet.”
Woo highlights the volatility of Bitcoin and most altcoins as being a barrier to entry for most investors, with gold-backing in the form of a stablecoin providing more protection against the recent price crash experience this month,
“Unlike Bitcoin and Ether, whose prices trade wildly, gold-backed tokens have an intrinsic value and should be a lot less volatile…G-Coin [is] backed by gold produced in accordance with World Gold Council and Responsible Jewellery Council standards. The resulting gold can be tracked from mine to vault using blockchain.”
Given the strain put on both investor portfolios and the general perception of the crypto industry, it is little surprise that stablecoins are becoming a more attractive feature for new ventures into the world of digital assets. Until Bitcoin can prove long-term viability and stability to holders, cryptocurrency might continue to give more market share to currencies which can tie their value to an external, and theoretically more stable source.
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