#6: The Scoop on Stablecoins ⚖️
When the average person thinks of crypto, some things that may come to mind are:
Highly volatile
Where is the backing / value?
Lots of scams
“The Future”
Your younger cousin who made a million dollars on Dogecoin
Your other friend who lost everything
What likely doesn’t immediately come to mind is stable prices.
Stablecoins are cryptocurrencies that peg their price to another asset (mainly the US dollar) and play a massive role in the crypto ecosystem. The stablecoins sector currently accounts for almost 15% of the total crypto market capitalization.
What problems can a stable cryptocurrency solve? Isn’t crypto just for gambling and chasing risky returns?
Here are a few important potential use cases for stablecoins:
You decide that the market has been too volatile recently and you want to allocate part of your portfolio to cash. Stablecoins allow a USD cash equivalent that lives on the blockchain and can be instantly traded for other cryptos.
If you wanted to put this money in your bank instead, it would take several days to transfer back and forth. You may also face limits on transfers and require additional verification. The decentralized nature of stablecoins gives them the potential to revolutionize financial activities.
Traditional dollars cannot be utilized on the blockchain:
If you want to use dollars to engage with the blockchain or utilize decentralized applications (Dapps), you will need to use stablecoins as blockchains do not work with traditional dollars - just as you can’t use Chuck E. Cheese tokens at D&Bs.
Currency is meant to be stable, investments fluctuate:
While people invest in assets with the anticipation that they will gain value, they do not want their “currency” constantly fluctuating in value. Imagine driving to the store and your buying power changes by 5-10% while you are commuting…
Remittances:
Stable prices are essential when sending money around, and the decentralized nature of stablecoins allows for cheap and seamless cross-border payments.
While stablecoins need clearer regulation and more innovation to continue to make leaps in the digital world, their emergence (aside from the Luna/Terra fiasco) so far has been promising.
Quote of the Week:
“If I had asked people what they wanted, they would have said faster horses.” - Henry Ford
Price Performance:
Top Stories:
Amazon to Enter Crypto Market with Gaming Initiative (CryptoNews)
Amazon is looking to create a gaming platform that uses NFTs to reward players. What I imagine they’ll do is use them to act as badges or milestone completions, very similar to a standard game.
The key difference with using NFTs versus standard in-game badges is the ability to use those NFTs outside of the game itself. Amazon can now reward their gamers outside of the actual game through:
Discounts / Exclusive offers
The ability to trade and sell their rewards
The ability to utilize their rewards in other areas of the digital world
This approach continues a strong trend from 2022 where major corporations enter the space, while users unknowingly engage with digital wallets and NFTs - sometimes now referred to as “vaults” and “digital collectibles”.
At the end of the day, the goal for brands (Amazon) is to boost consumer engagement and bolster interoperability across their digital presence. The goal for crypto is to become so seamless and user-friendly that is reaches mass adoption without anyone even thinking about it or questioning how it works (as we view our cars and the internet today).
Tesla Held All Its Bitcoin Through Crypto Market Turmoil (Blockworks)
Shown by Tesla’s latest earnings report.
Moody’s is Working on a System to Score Stablecoins (Bloomberg)
This is a necessary step for stablecoins. A ratings agency that deals with quantifying the risk of assets should probably be a requirement for a coin that is being promoted as “stable”, especially after some past stablecoins were proven not-so-stable.
Evaluating how an asset remains stable requires an under the hood view, which can often be daunting or confusing to the every day investor. A 3rd party ratings agency (as well as some regulatory clarity) providing more confidence to the general public would be a meaningful addition to one of the most important components of Crypto.
Goldman Sachs Ranks Bitcoin as Top Performing Asset for 2023 (Forbes)
Whether they’re correct or not, this is a very interesting argument for the value of Bitcoin and crypto overall.
Nike’s New Initiative, DOT SWOOSH, Launches User-Driven Design Competition to Prepare for 1st Release (CoinDesk)
The collectibles and lifestyle giant prepares for its new digital pursuit.
Twitter Payments Will Be Fiat, Built So That Crypto Functionality Could Be Added (Financial Times)
You can say a lot about Elon Musk… You may say he enters agreements prematurely or that he makes unrealistic promises, but something you can’t say is that he doesn’t know how to build and grow a premium payment processor… (He is one of the Founders of PayPal).
Twitter reaches an international audience and is a hub for crypto enthusiasts who have been awaiting payment integration and creator monetization for a long time. Based on the impact that a single tweet from Elon can have on the price movement of a token, it is exciting to think about the potential of all users being exposed to wallets and Web3 from a platform that they trust.
Thread / Read(s) of the Week:
Visual of the Week:
This Week Ahead:
Big week coming up…
Wednesday (2/1): FOMC Decision, META Earnings
Thursday (2/2): ECB Rate Hike Decision, Google / Amazon / Apple Earnings
Friday (2/3): Unemployment Data Released
Appreciate you reading - enjoy the week!