Trend of the year: Stablecoins instead of ICO

With ICOs falling out of grace with the cryptocurrency community, stablecoins are a new trend in town. Tired of volatility, the market is waiting for the emergence of more than 100 new tools. But can it save the industry from instability and what are the prospects for stablecoins? NetShopping decided to take a look at what future might hold for that new trend.

 

ICOs are fading away

The era of ICO’s easy money has come to an end. Such conclusion can be made when looking at the dynamics of the collection of funds over the past year. Many rating agencies and research firms cite their numbers: ICORating and TokenData are some of the few whose data can be trusted. Regardless of the calculation parameters, the trend is obvious.

In November, comparing the results with the best month of 2018, ICO-raised funds fell by 86% according to ICORating and by 97% according to TokenData. The undermined confidence in ICO projects against the background of a huge number of scams and fall in cryptocurrency rates did their job.

However, the ICO recession triggered the development of a new crypto market segment — stablecoins. In essence, those are cryptocurrencies, the prices of which are stable relative to the entire market.

Stablecoins enter the scene

Retrospectively, when the market falls, investors are shifted to more stable assets. And it’s not about the cryptocurrency market, the volume of which is not even comparable to the capitalization of major corporations like Google or Apple. It’s about how the global capital market works.

During the 2008 crisis, US Treasury securities received record-breaking investments — that’s what is traditionally regarded as the most risk-free investment option. The same is true for the cryptocurrency field. During periods when there were the sharpest drops in Bitcoin and Ethereum, there were jumps in purchases of stablecoins.

Much more compelling evidence of the growing popularity of stablecoins is the growth in the number of new startups in this area.

According to the Blockchain.com study, despite the fact that there are currently 23 stablecoin projects, 34 more projects are in development as well.

It is important to note that one such startup can release several stable cryptocurrencies at once, when one, for example, will be pegged to the dollar, and the other one to the euro. For this reason, the real number of stablecoins that will appear in the near future may be more than 50.

The growth in the number of new projects is associated not only with the growing market demand for stable cryptocurrency assets, but also with the disturbed reputation of the most popular stablecoin — Tether. In theory, the value of its USDT token should be equal to 1 US dollar, although in October, amid problems with foreign currency collateral, the USDT rate reached $ 0.92, which is 8% lower than the required price.

According to Blockchain.com, the total capitalization of existing stablecoin companies is $ 3 billion, i.e. about 2% of the cryptocurrency market. Taking into account the needs of the financial industry in stable, low-risk, but decentralized assets, the figure of 2% has great growth potential.

Where does it lead?

In 2019, the largest increase in liquidity can be observed in the cryptocurrency that is applicable in the real economy and will help to enter the market for large institutional capital.

According to experts, the death of hundreds of different coins has proved that it is impossible to create value without real use in the economy. In order to have value for the real sector, the coin must definitely have a stable exchange rate. People do not need “pumps and dumps” as much as trading, as well as an effective and cheap way to transfer money.

The most popular Bitcoin cryptocurrency is not suitable for the real economy sector due to its volatility, although it is not going anywhere. The niche will be occupied by those stablecoins that will be fairly decentralized, transparent and convenient in use for both ordinary people and investors.

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