Category Archives: Gemini Dollar (GUSD)

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Stablecoins Used by Nearly All Market Participants

Stablecoins Are Used by Nearly All Market Participant

Even though cryptocurrency is touted to be more efficient than legacy currency systems, it appears most cryptocurrency traders can’t help but peg their trust to fiat or its digital look-alike. This assumption holds true as a report by Binance Research indicated nearly all market participants use stablecoins.

Stablecoins are best known for their hedge against volatility in the cryptocurrency markets and though in a few cases are used as a medium of exchange, their most widely adopted use case is in a crypto-to-stablecoin trade environment. The level of adoption, however, especially the most used types – stablecoins backed by fiat – do reveal the strong industry ties to fiat systems.

According to Binance Research, while sampling its institutional and VIP clients, it observed that “90% of the clients use USD as the benchmark currency”, which further supports their initial theory on the adoption potential of stablecoins backed by USD. The report further suggested “USD stablecoins and USD-denominated platforms are the leading forces of the cryptocurrency and digital asset industry”.

As a correlation between the level of adoption of stablecoins and fiat-dependence, a subtle observation pointed out in the research indicated a large number of the respondents had prior experience in the financial industry exclusive of the digital asset industry. At the time of the study, more than half of the market participants sampled, either had one foot in the equity market or the foreign exchange market, which evidently supports the gravitation towards fiat-dependency.

Comparatively, the traditional financial market has well-established hedging strategies in the form of offsetting stock positions, options, futures, and bonds, to reduce exposure to market risks. On the other hand, while the cryptocurrency industry may have mirrored a few of these market derivatives – which for the most part are largely accessible by large investors and those rather conversant with the financial market principles, adoption of fiat-backed stablecoins by all class of investors has been somewhat sporadic with USDT taking the lead.

Circulating Supply of stablecoins since June 8th:

GUSD: -16 million
PAX: -36 million
TUSD: -42 million
USDC: +20 million
Tether: +280 million

🤔

— Giancarlo The Tether Whisperer (@CasPiancey) June 27, 2019

With respect to the recent bull-run which dazed many in the industry, as flagship cryptocurrency Bitcoin touched new highs in over 16 months, some have opined that the mysterious uptrend may not have been without the help and from an uptick in the recent interest stablecoins.

The renewed interest in the bull-market of crypto may seem a mystery to some, but perhaps it had to do with the catalyst brought by Libra, Paxos, and other stablecoins in the market!

— Paxos (@PaxosGlobal) July 2, 2019

Adoption of other types of stablecoins – those backed by commodities and by other forms of cryptocurrencies, don’t seem like the go-to-choice for investors in times of strong market movements. As a matter of fact, a recent report indicated only 30% of all stablecoins are currently operational, with the demise of a majority resembling cryptocurrency pegged to physical commodities such as gold and other precious metals.

 

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Tether’s Rivals Continue to Gain Stablecoin Ground

The emergence of stablecoins continues to provide a glimpse of hope to cryptocurrency investors despite the market’s steep decline since its all-time high in 2017.

However, not too long ago, this confidence began to shift away from Tether (USDT) – the largest stablecoin by capitalization, to others such as Huobi (HUSD), USD Coin (USDC), True USD (TUSD), Paxos Standard Token (PAX), and Gemini Dollar (GUSD). Many of those in the list have seen rising premiums against USDT in recent months.

In a recent stablecoin conference organized by BECON, which was held in New York on Monday, General Counsel of Huobi’s Global Institutional Joshua Goodbody discussed the important roles stablecoins play in the crypto-market affairs. In his opinion, they serve as bridges between the fiat world and the world of cryptocurrencies.

Since its launch, one of Tether’s rivals, HUSD, has proven to be popular among users, says Goodbody.

Stablecoins are perceived to mimic the qualities of real-world fiat properties. Therefore, they establish a baseline of trust for investors, and traders of cryptocurrencies to hedge. This was the objective in mind when Huobi proposed its stablecoin in late October as a complementary solution to help make investment decisions among multiple stablecoins and save costs when trading stablecoins.

Goodbody during the conference made it clear that they “believe the recent developments of stablecoins are positive for the industry and Huobi decided to support these developments proactively by launching HUSD”. The Stablecoin HUSD integrates the properties of four other major stablecoins to include PAX, TUSD, USDC, and GUSD.

As an aggregator of stablecoins, the HUSD interfaces between any of the four supported stablecoins and gives traders the flexibility of switching to any of them on a 1:1 ration at any point in time. Goodbody said that they “provide the ability to deposit any of the four supported coins as HUSD and receive a 1:1 balance of HUSD”. Further, these stablecoins can also be traded with six other cryptocurrency pairs on the Huobi exchange. These include BTC, USDT, ETH, and EOS.

HUSD is not a particular token or coin on the blockchain, but a mere service being offered by Huobi Global. The way the product works is that, when any stable coin is deposited into a user’s account with the exchange, they are registered as HUSD balances. This gives a pseudo-interoperability between the four stable coins currently being supported. As described by the exchange when the balance on a stablecoin type is low, users can simply withdraw with another with sufficient balance.

In other news, Coinbase decided to launch an over-the-counter (OTC) trading desk earlier this month for institutional investors and in an interview, USDC is described as “one of the most liquid stablecoins” on the market to help stem volatility.

To a large extent, stablecoins play an important role in stabilizing the market. So far, the stablecoin markets have provided a safety net-like effect for investors and traders whose portfolios are being devalued by the current market crash, thereby acting as a soothing balm to the hysteria in the cryptocurrency ecosystem.

 

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