Stablecoins Emerge as Major Crypto Development in 2018
Despite the crisis at the end of October, Tether (USDT) remained the most stable dollar-pegged coin in the long run, and other stablecoins increased their influence.
Stablecoins, along with security tokens, were among the major crypto trends in 2018. In a year with a prolonged bear market and increasing volatility, the importance of a coin with a predictable dollar value proved instrumental. During sell-offs, traders relied on stablecoins to protect some of their gains as cash also ceased to be directly injected into the crypto market.
“Even with recent turmoil, Tether remains squarely the least volatile stablecoin of 2018, deviating less than 0.5% – or less than half a cent – from the mean on a daily basis,” according to a Santiment analysis.
The debate on centralized versus decentralized stablecoins continues. Decentralized, or algorithmic, stablecoins, appear to fluctuate more. BitUSD had the highest volatility among stablecoins, easily losing its peg due to not being well-defended by BitShares.
Santiment further pointed out that stablecoins were also affected by Bitcoin (BTC) price action. One of the reasons is that after a BTC sell-off, some of the funds move into USDT and then into other stablecoins, such as Paxos (PAX), USDC, or TrueUSD (TUSD). This has led to a price movement in which USDT drops below the dollar level while the rest of the coins rise a few cents above the peg due to increased demand.
As the bear market persists, trading happens mostly against other crypto assets. After the latest sell-off, USDT pairs made up over 24% for all crypto trading. Without the liquidity of stablecoins, the crypto market would have plunged even lower.
In the past year, the USDT supply also had the greatest fluctuation. New emissions pushed it above 3 billion coins, but then the Tether issuer removed 1.3 billion USDT from the market in the course of one week in October 2018.
To some extent, stablecoins have also paved the way for security tokens and the tokenization of real-world assets, according to the organizers of the upcoming Blockshow Asia event in Singapore.
“We believe the security tokens ecosystem has reached a critical level. The combination of developments in infrastructure platforms; first-mover examples of companies that raise funding by issuing security tokens; and the emergence of new, trustworthy stablecoins finally enables a much deeper intersection of the off-chain and crypto economies. Thus, new projects to be built on top of them,” the Blockshow team commented in a statement emailed to Cryptovest.
The crypto event, which is launching next week, will focus heavily on the potential of security token offerings and the role of stablecoins in attracting new investors to the cryptocurrency space.
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