Category Archives: Gemini Dollar

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Huobi Launching Universal Stablecoin HUSD

Huobi, one of the top 3 crypto exchanges in the world with hundreds of millions of USD trading volume per day has announced the launch of a universal stablecoin called HUSD. HUSD can be interchanged with the Gemini Dollar (GUSD), USD Coin (USDC) which is managed by Circle, True USD (TUSD), and Paxos Standard (PAX). The official launch date for HUSD is scheduled for 22 of October 2018.

The goal of HUSD is to eliminate the need to choose between different stablecoins and to save costs when switching between stablecoins. Further, the aggregation of 4 stablecoins into 1 stablecoin will increase liquidity in the HUSD trading pair, versus having liquidity spread out between trading pairs for the 4 stablecoins. Increased liquidity generally leads to better deals when trading.

Tether (USDT) has experienced volatility recently, dropping as low as USD 0.925 for a brief amount of time, an unideal situation for any stablecoin. Since then USDT has risen close to USD 0.985 and is getting closer to parity each passing day, as of this writing on 20 October 2018. The loss of parity with the USD, even if it is only temporary, prompted Huobi to list GUSD, USDC, PAX, and TUSD so traders would have an alternative to USDT. Deposits for these stablecoins began on 19 October.

HUSD will be completely interchangeable with GUSD, USDC, PAX, and TUSD, meaning when a customer decides to withdraw HUSD they can withdraw any of these 4 stablecoins. Therefore, it will cost nothing to trade between the 4 stablecoins that comprise HUSD. A USDT/HUSD trading pair will be launched on 22 October, allowing customers to move coins back and forth between Tether and the other 4 stablecoins. However, the withdrawal service for HUSD won’t be available for 1-2 weeks, and likewise, the BTC/HUSD and ETH/HUSD trading pairs will be launched later at an unspecified time.

Huobi says they are looking forward to adding more stablecoins in the future, but for now, will test HUSD with these 4 stablecoins to determine the stability of the new system. If any stablecoin does not meet risk control standards it will be removed.

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Gemini Dollar, TrueUSD, USDC, and PAX Surge Above Parity With USD as USDT Struggles

Tether (USDT), the #1 stablecoin with a market cap in excess of USD 2 billion, has been struggling recently due to banking problems at Bitfinex, and its price has dropped below parity with the USD. Simultaneously other stablecoins including the Gemini Dollar (USDG), True USD (TUSD), USD//Coin (USDC), and Paxos Standard Token (PAX) have surged above parity with the USD, indicating that people are exchanging their USDT for other stablecoins.

Through early October 2018, USDT maintained parity with the USD, and there were roughly 2.8 billion USDT in circulation. Then the USDT gradually declined to about USD 0.99, before 320 million USDT were redeemed and taken out of circulation. This perhaps caused a run on Tether Limited, possibly making redemption temporarily impossible and removing the backing of USD cash reserves, which is the primary mechanism that keeps USDT at parity with the USD.

The price of USDT crashed on 15 October 2018 to USD 0.925, and temporarily went as low as USD 0.87 on at least one exchange. The drastic price movement serves as strong evidence that there was no USD backing USDT at that time due to banking troubles. In general, people should be able to redeem USDT at parity for USD through Tether Limited, and would not sell USDT for less than 1 USD unless Tether Limited’s redemption process stopped working. The price of USDT recovered to USD 0.98 within a day of this crash, but then another 250 million USDT were redeemed and taken out of circulation, and now as of this writing on 17 October USDT’s price is slowly declining and approaching USD 0.97. Since the Tether crisis began, the USDT market cap has declined USD 600 million from USD 2.8 billion to USD 2.2 billion.

Traders and investors have clearly been shifting their holdings from USDT to several other major stablecoins that are available. The USDG which is run by the Gemini exchange briefly surged to a high of USD 1.19 on 16 October, TUSD spiked to USD 1.08, USDC run by Circle hit USD 1.11, and PAX reached USD 1.08. Since then these stablecoins have declined to a consensus of USD 1.02 to USD 1.03 as of 17 October. It is interesting to note that as of this writing these stablecoins are 2-3 cents above parity with the USD, while Tether is 2-3 cents below parity with the USD.

While people who were holding TUSD, USDC, PAX, and USDG before the stablecoin rally began might have made some profits, it is probably not a good thing that these stablecoins are not at parity with the USD, and is just as bad as USDT being below parity with the USD but for different reasons. First off, stablecoins are backed by cash reserves stored with the company that runs them, so any excess above parity with USD is not redeemable for cash. Therefore, if someone buys a stablecoin that is above parity with the USD, long term they will lose that excess above parity as the stablecoin heads back to parity. For this reason, traders and investors would be cautious to invest in a stablecoin for any price above USD 1, since they know they would end up losing some money long term once the stablecoin market stabilizes.

For the time being, as USDT continues to struggle and decline further from parity, traders and investors will be shifting money from USDT to other stablecoins in rapid fashion, lifting those stablecoins above parity with USD. Traders are probably directly trading their USDT for other stablecoins, and there is far more USDT in circulation than the supply of all the other stablecoins combined. Long-term, stablecoins will go back to being at parity with the USD, whether that comes from Tether regaining its footing and going back to parity or completely unwinding to zero remains to be seen.

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Australia To Get Its First Stablecoin Next Year

Next year, Australia will get its first stablecoin developed in partnership between a local exchange and a crypto employment platform.

The Emparta infrastructure empowers employers and job-seekers with instant onboarding and optional payments in cryptocurrency, allowing businesses to identify, select, and onboard employees. The company will combine with crypto exchange Bit Trade to release the coin according to an announcement made this week.

Bit Trade has announced that it wants to be the first one in Australia to use the virtual currency, suggesting that due to its value being backed by an underlying asset it will be less liable to volatility. Bit Trade’s managing director Jonathon Miller sees the stablecoin doing as its name suggests in a fluctuating crypto market. He commented:

“Stablecoins solve one of the principal issues that may drive investors seeking steady returns and merchants that currently accept traditional currency away from digital currencies: volatility.”

Miller sees such coins as going a long way to promoting further interest in the country’s already flourishing crypto market, given that the regulatory environment continues to move in the right direction. Currently, Australians are showing more interest in cryptocurrencies, with recent figures from HiveEX showing that those ‘hodling’ crypto assets have increased from 5% in January to 13.5% when the figures were reviewed in August of this year. Bit Trade’s chief added that this level of adoption could well continue with such introductions into the market:

“We believe that stablecoins will boost trust, accelerate wide-spread adoption, and could function as the backbone of blockchain-based financial applications, especially here in Australia given the favourable regulatory environment.”

In order to back the stablecoin with Australian dollars, the first treasury of the new stable coin would be held in Australia, the AUD-backed coin being redeemable on demand. Currently, there are other stablecoins available along with Tether, including the newly announced Gemini Dollar.

This stablecoin, launched by the Winklevoss twins, will allow users a one to one exchange on the US dollar on the Ethereum blockchain. They commented on the approval, suggesting that their thinking behind Gemini was a “first step… making it safe and easy to buy, sell, and store cryptocurrencies”.

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The Rise Of Centralized Cryptocurrencies

The Gemini Dollar (USDG) is a new stable coin pegged at parity to the USD. It has been launched by the Gemini Exchange headquartered in the United States. Crypto coding expert Alex Lebed found that the USDG is completely centralized. Meaning, Gemini can freeze accounts, freeze the entire USDG coin supply, and print infinite USDG. But this is not just an isolated case as centralized cryptocurrencies like the USDG are becoming more common these days.

There are actually a couple of centralized cryptocurrencies hiding in plain sight among the top 10 cryptocurrencies by market cap. Tether (USDT), with a market cap of USD 2.76 billion, is the most popular stable coin, often used in place of the USD when the USD is not available. The popularity and success of USDT probably has a lot to do with the creation of USDG, and just like USDG the USDT is centralized to an extent. USD 30 million of USDT was stolen in a hack, and Tether Limited unleashed an emergency hard fork which reversed the hack.

This means USDT is not immutable, where immutable means transactions cannot be reversed. Immutability is one of the key advantages of Bitcoin. The fact that USDT is not immutable makes it much like fiat currency payment networks, such as banks or PayPal, and means users could have their funds reversed or frozen at any time.

EOS has a market cap of USD 4.84 billion, and it is run by a centralized organization of block producers. The EOS block producers work together and have in the past frozen EOS accounts since it was reported that a hack occurred. This means all EOS accounts can be frozen, just like when using a bank or PayPal. This likely is part of the reason EOS’ price dropped significantly after launch.

The People’s Bank of China (PBoC) is planning on launching a Chinese national cryptocurrency, and it is clear that the PBoC will have centralized control to print this crypto at will and freeze accounts. When the PBoC crypto launches, it has the potential to be one of the top cryptos in the world, since it would be the only crypto in China that can be traded legally for fiat.

Essentially, regulations on cryptocurrency are becoming tighter with each passing month, and it is much easier to get a crypto approved for launch by the government if it is centralized. If the government comes to Gemini or Tether Limited with any concerns about money laundering regarding a specific account, Gemini and Tether Limited can simply freeze the account. For centralized cryptocurrencies like USDG and USDT, the government has just as much control as the organizations running the crypto, and this creates a precarious situation for users of those cryptocurrencies.

Crypto users should be careful and fully understand a crypto before they buy it and begin making transactions, and it is best to avoid centralized cryptocurrencies. Most cryptocurrencies are still decentralized and immutable, and these are optimal for business since there’s no chance of the government or a corporation freezing the money. There’s even a decentralized stable coin called Stableunit, created by Lebed, the same person who discovered that USDG is centralized.

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