Category Archives: PAX

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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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Winklevoss Bonus as New York Regulator Approves Gemini Stablecoin

In a statement on Monday, the New York state regulator revealed that it had approved two dollar-linked digital tokens, including one launched by the Winklevoss brothers.

Two firms, Gemini Trust Company, and the Paxos Trust Company, are the first stablecoin providers to receive the go-ahead to list on exchanges in New York State.

A stablecoin is a cryptocurrency pegged against the USD, giving it price-stable characteristics, seen by some as a safe hedge against the volatility of conventional cryptocurrencies such as Bitcoin or Ethereum. Currently, they are underutilized apart from traders using them to guard their positions during bear markets.

New York State’s Superintendent of Financial Services Mario Vullo commented on the Gemini/Paxos  decision:

“These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework that safeguards regulated entities and protects consumers.”

The Gemini Dollar, launched by the Winklevoss twins, will allow users a one to one exchange on the US dollar on the Ethereum blockchain. On Monday, 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”. They saw the launch of Gemini four years ago as a “mission” to “build a bridge to the future of money”.

In exactly the same way as the Gemini, the company’s stablecoin, Paxos Standard, will also be linked to the US dollar on a one to one basis.

Nick Tomaino founder of @1confirmation calls stablecoins “the holy grail of cryptocurrency“, suggesting that coins such as Bitcoin were too prone to volatility. Tomaino suggests that the US dollar is a fiat working example of stability. The dollar falls down as a stablecoin, primarily because it lacks user control being dependent on the Federal Reserve and the US banking system.

Investors trading through the itBit exchange will able to cash out their crypto to Paxos Standard, which will trade as PAX on other exchanges.

 

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