Category Archives: Gemini and Pax

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Stablecoin War: Dollar-Pegged Cryptos Allegedly Offering Discounts

Stablecoin

According to some sources, the issuers of Gemini and PAX, two famous stablecoins, have been offering over the counter (OTC) traders a 1% discount if their tokens were used for buying something before being liquidated for fiat.

The obvious reason for such an incentive was to get the stablecoin in circulation, not only as a means of storing value but for actual usage of real life purchases.

Made famous by Tether (USDT), stablecoins are offering a solution to something that cryptocurrencies are infamous for: price volatility. Traditionally, cryptocurrencies have always created their own value, driven by simple economics of supply and demand. Stablecoins counter this by fixing their value against a fiat (typically, the US dollar) and then the issuers’ release of buyback from the market to ensure that the supply and demand keep their equilibrium and a 1:1 ratio.

“They were offering that as a sweetener for getting it kick-started with adoption,” said one OTC trader who wished to remain anonymous, “A lot of the arbitrage opportunities were manufactured.”

The trader was right. In December last year, OTC trading and exchanges saw a flurry of trading, with several million dollars of tokens being traded in a single day. Gemini’s (GUSD) market cap made an astonishing jump from USD 87 million to USD 103 million in a single day.

The VP of Paxos marketing and communications, Dorothy Chang, said that this incentive by Paxos (PAX) was offered to only a few selected partners for only a couple of months.

The incentives offered made their mark. The USDT saw its parity being broken, as GUSD and PAX gained market cap.

These incentives have made stable coins like GUSD and PAX a favorite for many traders, but they still have a far way to go before becoming as strong as USDT, which has the advantage of being the first. This is similar to regular cryptocurrencies, where many offer more advantages than Bitcoin (speed, efficiency, mining and others) but are still in the shadows because Bitcoin was the first.

That may change for PAX, GUSD and other stable coins that are legally compliant. With stable coins offering legal coverage and better liquidity, they can overtake USDT, if they play their cards right.

 

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