With the rise in the popularity of cryptocurrencies in the past decade and more, the market has been abuzz. However, the fiat currencies, through their structural support and backing, have still prevailed. The main ground for the skeptic reason of approach on behalf of the governments and the authorities involved have been the drastic swings in the value of cryptocurrencies. Even someone like Bitcoin saw its fair share of ups and down through the market, and that has often made the authorities term the cryptocurrency world as a grey area.
With the introduction of Stablecoins, the mood and the vote shifted completely towards the crypto giants. What the original cryptocurrency fluctuations came from was the lack of a solid backing. For example, fiat currencies are each backed through a definite set of reserves that prevent any drastic swings. Reserves such as gold, oil, or other measurable prevent the abrupt nature of swings. On a similar line of action, the Stablecoins have decoded the market trend and provided the guarantee of value to their users. As a settlement of the cryptocurrency vulnerability debate, these stable coins are validated across backed assets too. Fiat-Collateralized or Crypto-Collateralized Stablecoins have taken to the task and reminded the market that the days of questioning are over.
Moreover, what Stablecoins provide over the fiat currencies is the ability to move and flow. For instance, during the recent market change in the mid of March, Stablecoins were the chosen partners for payments. These included national and international exchanges, small and large remittances, and much more. Hence, the question of a Stablecoin overtaking the standardized market governance and dictation of the US Dollar is legitimate.
Rise of Tether (USDT) — The $5 Billion Fresh Stake
CTO Paolo Ardoino, who is at the helm of proceedings for the Tether and Bitfinex instruments, is vocal about the uprise. He admitted that the USDT Stablecoin has seen unparalleled investment in the recent six months and that all of these investments are due to the market demand. Ardoino pointed out the recent downfall of the “stable fiat currencies,” and their endearing stock market in the first quarters of 2020 left the investors gasping for cash. The changing trend meant that more people willingly invested in mobilizing the fiat investments that were stocked in the bank lockers and hence turned to Tether. The trend dictated unanimously over the decision of Tether to print as much as $5 billion worth of its coin since the start of the year.
The whole argument found a much-unexpected ally when Da Hongfei, the NEO founder, explained why the USDT could “dethrone the US Dollar.” The explanation again emphasized the trust vested by the user into the stable coin on an international basis. The emphasis also remained on how the financial institutions and agencies have tried to scrutinize the upsurge of USDT and have not found anything to bother.
What goes in favor of the Stablecoin is that the central banking system does not regulate these. Hence, a more flexible and equally stable approach is provided to the users. In the times of crash crunch and crisis, the reliance of consumers onto USDT for exchanges, payments, investments, and even international settlements is a huge revelation of the future shaping up. The whole progress report meant that the Tether (USDT) market cap crossed the coveted $10 Billion mark. It is also one of the few who have done it successfully, with Bitcoin being another giant along with Ethereum in the reckoning.
The Bitcoin Outflow
Paolo Ardoino also addressed how the change in the trend of the outflow for the Bitcoin through the Bitfinex was a reflection of the market change. Through the depreciation in the mid of March, the trend for the price of the Bitcoin on Bitfinex had reversed. The suggestion of the whole scenario giving way to more arbitrage opportunities stood clear as the primary reason for the outflow. The traders and investors chose to get hold of the Bitcoin on Bitfinex on a comparatively lower price and then sell those for a significant profit on various exchanges.
The Digital Dollar Alarm Bell
In what seemed to be a possible aftereffect of the hype around the whole Stablecoin conundrum, the senate seemed to learn its lessons. The lessons have come quickly and convincingly, too, as the stance has changed drastically over a short period. The Senate banking committee discussed the possible inclusion of a digital dollar, as touted by Sen. Tom Cotton emphasized that the digital changeover is important to sustain the worth of the USD in the international reckoning.
Further discussions about what law changes could facilitate the transition and establishment also took place. Giancarlo said that the present system of currency exchange is relatively slow and excluded a lot of growth considerations. Furthermore, Chairman Mike Crapo emphasized the need to strengthen the financial systems and make them more capable of dealing with the changes.
With the entire discussion holding 25 or more questions for and against the system, each was specifically directed to a digital dollar setup. In hindsight, the falling significance of the USD against a Stablecoin currency like the USDT with much wider acceptance has rung the alarm bells. What also stands out is the inclusion factor for the relevant middle-class section, as highlighted by the senate discussion. The ease of transaction, along with the integration of fixed income value, what the Stablecoin genesis has handled nicely, has an integral role for acceptance.