- Investors are turning towards assets that are less volatile and less risky.
- Bloomberg writer Joe Weisenthal thinks that people may hold stablecoins just like they hold the US Dollar.
- Stablecoin may undermine the precious principle of Bitcoin – ‘Decentralization’
Stablecoins are becoming a phenomenon. This week, the total supply of stablecoins surpassed the $100 billion mark. Stablecoins are digital assets that are often pegged to some other assets like the US dollar or any other fiat currency. Stablecoins are popular because of their lower volatility than traditional cryptocurrencies.
Investors Search Assets With Less Volatility – Stablecoins Serve the Purpose
As of now, the list of stablecoins is led by Tether, followed by USDC. Tether USDT is currently trading $1.00 and is up by 0.02% in the last 24 hours. The market capitalization stands at $63.31 billion, and the daily volume is $114.19 billion. At the same time, USDC is up by 0.15% in the last 24 hours. The market capitalization of the stablecoin is $21.51 billion, and the 24 trading volume stands at $5.37 billion. In the wake of extreme volatile cryptocurrencies, investors turn towards less volatile assets and less risky ones.
John Griffin Explains how Stable tokens are Pretty Similar to Traditional Bank Accounts
What made Bitcoin famous in the first place was its decentralized nature. The fact that people could hold on to an asset and pass it on to each other without a centralized medium was what attracted investors to cryptocurrency. However, stablecoins allow users to transfer dollar-denominated assets through a cryptocurrency exchange quickly. However, in a recent Bloomberg article, Joe Weisenthal thinks that people may hold stablecoins just like they hold the US Dollar.
John Griffin, professor of finance at the University of Texas at Austin, explained this very profoundly in an email to LiveMint. He said that if companies are putting their money on stablecoins that happen to be fully audited, it is the same thing as putting their money in a traditional bank account. This undermines cryptocurrency’s decentralized principle. Griffin further added that the stablecoin gives them a higher yield than the bank account; then, it becomes clear that it is not a risk-free asset.