Is the Crypto Market Saturated With Stablecoin Offerings? A Closer Look into Fiat-Pegged Tokens
Even though the crypto sector has made a recovery of sorts over the course of the past 24-48 hours, news of the recent Tether scandal has continued to dominate the global news cycle (as well as affect the price of many premier digital currencies in a negative manner). For those of our readers who might not be aware of this recent development, it has come to light that popular crypto exchange Bitfinex recently made use of Tether (USDT) tokens to mask nearly $850 million worth of funds that had previously gone missing from the company’s coffers.
In this regard, it should be clearly noted that over the course of the last 180 days or so, a number of different stablecoin projects have emerged onto the scene — primarily because the niche’ asset class has attracted the attention of a number of cryptocurrency developers and start-up investors.
If that wasn’t enough, many rumors circulating across the internet recently have claimed that even social media giant Facebook is all set to enter the altcoin sector by issuing its very own messaging based stablecoin.
With all of this information out there, we need to ask ourselves the question
“Are stablecoins already on the verge of being completely saturated?”.
A Closer Look At The Situation
As many of our readers may already know, Tether’s USDT is a leading industry stablecoin that currently has the eighth largest market capitalization of all crypto assets available for purchase today. However, in the wake of the aforementioned scandal, it now appears as though USDT is losing some of its clouts and other competitors are eating into the premier altcoin’s market share.
Also, the rise in the number of stablecoin projects can also be seen as a response to the price volatility and valuation shift that was experienced by the digital currency sector all through last year. In this regard, it should be noted that while stablecoins don't offer traders with the same speculative abilities like other altcoins do, they do offer them with the advantage of pegged valuations — which in theory, provide investors with more market stability.
Owing to the unique framework that most stablecoin offerings make use of, many big-name players such as Facebook and J.P. Morgan Chase too are looking to harness the benefits of this burgeoning asset class. In the case of FB, the company is looking to deploy a currency (stablecoin) that can be used as a medium of exchange for its users (without them having to incur a lot of day-to-day price fluctuations.)
Is The Saturation Already Beginning To Set In?
As mentioned earlier, one of the main drawbacks associated with stablecoins right now is that they are fast becoming a saturated commodity. And while the crypto sector is far from having reached its full potential, with a company like FB entering the stablecoin domain, we should ask ourselves the question
“How may stablecoins do we really need in this day and age?”
If certain reports are to be believed, Facecoin (the reported name for Facebook’s upcoming token offering) will run primarily via the firm’s Whatsapp messaging service. However, as more and more stablecoin projects continue to crop up, they will most definitely clog up the market and leave little to no room for differentiation.
In closing out this piece, we should point out that traditional altcoins such as BTC, ETH have been designed to allow their owners to speculate on their value and usability. In this regard, stablecoins have a much narrower field of operation — other than the fact that one project may be older than the other or might be associated with some big name company. Also, since stablecoins have very little ability to appreciate or change in value with investment, it is most likely that their market demand will remain limited over time.