Stablecoins: The Future of Money?

No question, cryptocurrencies are one of the most volatile assets you can own. But a new hybrid breed of cryptocurrencies, called “stablecoins,” attempts to narrow the gap between traditional instruments of cash and digital currencies.

Stablecoins were one of the hottest topics of the cryptocurrency conference that I just attended and one of the newest developments in the fast-moving crypto marketplace.

One of the issues with cryptocurrencies as a medium of payment is that the value of your cryptocurrency can vary widely — up or down — by the time a transaction is settled.


Stablecoins, rather than floating freely on the market, are pegged to stable, real-world assets — like gold or U.S. dollars. For example, buyers/sellers can exchange one dollar for one stablecoin, which they can later redeem for one dollar. The end result is the near elimination of the wild price swings in the cryptocurrency market.

Notice that I said “near” elimination, not the complete elimination, of volatility.

Stablecoins are an attempt to get the best of both worlds: The low volatility of fiat currencies with the vast advantages of digital currencies. There are over 100 stablecoins to choose from, with a total market value of $3 billion.

The most popular stablecoin is Tether, which has been around since 2001. Tether is backed one-for-one with a U.S. dollar, and accounts for 93% of the stable coin market value.


Stablecoins seem to have settled into a trading range of plus/minus 20% of $1 per coin. In the cryptocurrency world, a 20% trading range is quite tame and what I mean by the “near elimination” of volatility. Heck, as you know, cryptocurrencies like Bitcoin and Ethereum can move by 20% in a matter of hours.

Even more stablecoin choices are coming. Last month, Goldman Sachs announced a partnership with cryptocurrency exchange Coinbase to create the “USD Coin.”

There is no question in my mind that we are entering a new era of digital currencies. And Tether, with its first-mover advantage, is a worthy cryptocurrency consideration if you value stability over opportunity.

Stablecoins have the potential to expand the cryptocurrency user base by making them suitable for everyday shopping needs and creating an invaluable link between digital coins and fiat currencies.

That’s good for the entire cryptocurrency industry. And it’s especially positive for the behind-the-scenes companies that are building the blockchain infrastructure that makes stablecoins work.

Many of those companies are already publicly traded and can be tucked away in your IRA, 401(k) or brokerage account for gigantic gains.

In short, the cryptocurrency space is a fascinating one. That’s why Martin Weiss is unveiling our “8 Fearless Forecasts for Cryptocurrencies in 2019 and Beyond.” There, you’ll discover …

  • How the latest Bitcoin crash measures up against previous crashes that opened the door to average gains of 63-to-1.
  • Why Bitcoin surged 100-fold after its crash of 2014.
  • How high Bitcoin will go in its next bull market.
  • Which altcoins could beat Bitcoin by a wide margin.
  • Whether or not Ripple’s XRP, already the second-largest cryptocurrency in the world by market cap, could overtake Bitcoin as No. 1.
  • Which 3 famous and popular cryptos are the most likely to fade away.
  • Which 2 undiscovered cryptocurrencies are about to burst onto the scene and rocket to the top 10 by market cap.

Best wishes,
Tony

Editor’s note: Each editor’s opinions are strictly his or her own. They do not necessarily reflect the views or research of the publisher.

About the Technology Analyst

Even in the worst years for stocks, Tony was twice named “Portfolio Manager of the Year” by Thomson Financial. He was one of the first to introduce computer software for trading stocks. And in the early 2000s, he wrote “The Supernet,” providing a vision of the future internet that was far ahead of its time.

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