In a recent announcement, Binance announced that it would open three new trading pairs for stablecoins. These are USDC/YUSD, PAX/YUSD, and USDC/PAX. This announcement came with a definite timeframe in which this will take place. The pairs are going to be added on January 8, 2019, at 4:00 Am UTC.
Why Stablecoin Trading pairs
Crypto enthusiasts have noted that stablecoins pegged to US dollars sometimes do not always remain 1:1. A good example of this is when fake news was spread that Binance would definitely delist Tether USDT. This was purported to be due to issues of insolvency by the bank, which was being used by Tether to hold its dollars. The rumor began at around October 15, 2018, and resulted in USDT dropping about 5% of its value to trade at $0.95. After a few hours, the rumors were confirmed to be just fake news.
Slight 1:1 Stablecoin Deviation
On coinmarketcap.com, you can find that five of the biggest stablecoins show some deviation from the $1 mark. Some of them do so by as much as one cent. This is a one percent difference from the actual expected amount. The difference may be exploited with these pairings such as those offered by Binance.
The Combined Binance Stablecoin Market
The new stable coin pairs are going to be listed on the Binance stablecoin market. The market launched in November 2018. This move is supposed to provide more trading pairs that are having new stablecoins as their base. The exchange clarified that the new category was not a single stable coin.
Some in the crypto world explained that the Combined stable coin Market created by Binance was a way for the exchange to cater to institutional investors. These investors are still skeptic about Tether since the rumors started to circulate about its stability. Others in the crypto world believe that Binance was simply responding to requests by users for more options.
Why This Matters
These pairs will offer traders extra flexibility. It will allow them to move between the various trading pairs with more ease since they can now skip any additional steps, which will save fees. While it appears that liquidity is fragmented, market makers who can redeem any stablecoin for fiat will readily step in. It is especially so when you consider that the total stablecoin issuances are worth hundreds of millions.
This move will also work as an escape valve for the arbitrageurs. If exchanges offer fiat-coin at a minimal rebate, it could help to incentivize providers for liquidity. Someone is going to be able to readily arbitrage the price difference at the exchange. Up to now, there is limited trading for the stablecoin pairs, which has allowed the spreads to increase. More offering like those at this exchange will allow the market to deal with the uncertainty that exists around the issues of credit risk and liquidity. As time goes by, the crypto market microstructure is looking more like the fiat capital markets such as FX.