Why Are Stablecoins Critical for Crypto Adoption?

By Kapil Gauhar

Tether (USDT), a well-known stablecoin, is in a tough spot nowadays. From a lack of transparency, price manipulation accusations, and lingering questions about whether the cryptocurrency has sufficient cash reserves or not, there’s a lot that can be improved upon.

In spite of those issues, the demand for the stablecoin remains robust. According to a report released by CryptoCompare at the end of 2018 –

“Tether continues to represent the majority of Bitcoin trading into fiat or stablecoins at 65% of total monthly volume in December.”

So, Why Is Tether Successful?

The stablecoin has first mover advantage, which is eroding. 2019 will be an important year for stablecoins, which are critical for widespread crypto adoption.

Stablecoins are cryptocurrencies pegged to the commodity price. They are designed to be less volatile than other digital currencies and are centralized on the contrary to the decentralized approach of Bitcoin and other virtual currencies.

In the case of Tether, it is pegged to the value of USD in a 1:1 ratio. After years of ups and downs with Bitcoin, stablecoins offer an amazing alternative for anyone concerned by prolonged volatility. They are even going to be imperative in facilitating cross-border payments, daily transactions and legal money transfers.

Why 2019 Is An Important Year for Stablecoins?

In the aftermath of 2017’s cryptomania, the market gave the slip to the bad ICO projects and shed investors who purchased them amid the hype but were not interested in the long-term prospects of cryptocurrencies.

The result was a slow 2018 which proved to be a good year of consolidation and let regulators catch up to the innovation happening all around.

Now that this post-hysteria shakeout is over, it’s time for another wave. Stablecoins have real value depending on the underlying asset they are based on. Here’s what the CEO of crypto giant Circle, Jeremy Allaire, had to say about stablecoins’ last fall,

“If people can exchange value over the internet without a toll extracted for payments it’s pretty dramatic…it’ll make the web look like a cute experiment comparatively speaking in 10-15 years.”

Will Stablecoins Outpace Bitcoin?

Stablecoins offer an improved approach for cryptocurrencies to transfer the value. Also, there’s an ever-increasing number of stablecoins, such as J.P. Morgan’s recent entry into the market that will allow clients to settle the payments immediately.

With the trend towards stablecoins as a backdrop, it’s crucial to know which currencies offer the way forward for investors. TrueUSD and Gemini Dollar are two of the most promising stablecoin projects at press time.

In the case of TrueUSD, developed by TrustToken, dollars are held in escrow with partner financial institutions.

On the other hand, Gemini, created by Winklevoss brothers, holds equivalent dollars in US banks and offers a fully regulated solution.

Most importantly, the two coins offer better transparency than that of Tether.

Conclusion

Stablecoins are the next evolution of a continuously maturing market. Though much of the early cryptocurrency hype is gone, yet it’s for the best in the end. We are noticing the continuous adoption of virtual currencies as an inevitability. As that continues to happen, we may see stablecoins to lead the way in 2019.