Stablecoins have popped up everywhere lately. Tether has moved into the Top 5 on coinmarketcap.com. Similarly, it’s alternatives that did not even exist a year ago have made it easily into the Top 50 on coinmarketcap.com. In addition to that, stablecoins have gotten quite a few proponents outside of the crypto space. Meanwhile, central bankers are contemplating whether they should issue digital money or not.
Stablecoins Only Useful When Bitcoin & Co. Are Used
Stablecoins backed by fiat serve the primary purpose of storing the value of your crypto investment temporarily in a safe haven (but due to inflation not in the long-term). Tether’s business model is to take fees for the exchange of USDT. This is the reason why big exchanges have moved into the stablecoin market. Why use Tether if you can use the native stablecoin of the exchange of your trust?
The almost natural move of exchanges to create their own stablecoin, Tether’s bad name and the current bear market are responsible for the rise of stablecoins. Not because stablecoins have a future by themselves. They are a useful side tool for cryptocurrency traders. But outside of the crypto space they serve zero purpose. It is at least unusual if any retailer accepts Tether or any other stablecoin but not Bitcoin.
A person that has no knowledge of Bitcoin will not recognize the value of Bitcoin. If you want to pay digitally, why not use Visa, Applepay, Paypal or similar financial services. They are faster and save you likely time and effort. Precisely that is the reason why people that do not see any problem with our current monetary system cannot make any sense out of Bitcoin.
The inherent value of Bitcoin is that it is decentralized. Any stablecoin is not.
The key values of Bitcoin are still its properties of being permissionless, trustless and censorship-resistant. Any stablecoin involves by definition a third-party that has to be trusted at least with backing the token that it issues. Therefore, stablecoins do need permission and trust at some level. As any token issuer will likely seek regulation by governments it is possible for them to censor transactions.
A good example for that is the US sanctioning Iran. The USA strongly persecute any companies that do business with Iran without its consent. The banking and financial sector is under observation regarding this. The crypto sector is even under special observation as this report by the U.S. Financial Crimes Enforcement Network (FinCEN) shows. The state defines a misuse of cryptocurrencies in this case and it is able to make stablecoin issuers responsible for such misuse.
2019 – A Big Year for Stablecoins Depends on Bitcoin
An article on Coindesk.com claimed that ‘2019 Will Be a Big Year for Stablecoins‘. If there was a good year for all stablecoins it has likely been 2018. Tether’s slow and painful demise, the resulting market gap, the market correction, the on-going bear market. If you were a stablecoin issuer could you imagine any better market conditions?
Maybe 2019 will be a good year for one or two stablecoins that are able to create a network effect and to take Tether’s place. But that would mean that all other coins would have a very bad year. Plus given their functionality, the condition for 2019 being a good year of stablecoins regarding adoption is that it will be at least an evenly good year for Bitcoin & Co. as well.