Stablecoins Should be Dollar Pegged but GUSD, PAX, TUSD, USDT Prices Breaking
Stablecoins are Not all Created Equal
A war is being waged within the cryptocurrency community. Surprisingly, this feud has nothing to do with the top three coins dominating the market, Bitcoin, Ethereum, and Ripple (XRP). Instead, the lesser-known classification of crypto known as the stablecoin is experiencing what could be the biggest upheaval in the short-lived industry to date. It all started with a breaking down of Tether (USDT), a stablecoin supposedly pegged to the price of the United States Dollar.
With Tether now falling to below one dollar in price, its place as an effective stablecoin is in jeopardy. And although analysts have predicted Tether’s instability for quite some time now, it is not yet clear which of several stablecoins will take Tether’s place. The answer cannot be “none of them.” Stablecoins seem to serve a unique and important function in storing unchanging but non-fiat value in volatile crypto exchanges. The public interest is there. But with the competition rife, investors should know that a truly pegged stablecoin is incredibly rare.
The Fall of Tether
It is not quite clear what may have caused the USDT slide yesterday. A variety of negative revelations called into question the validity of the USD backing claimed by Tether officials, causing many investors to lose faith. Perhaps this is why the coin dropped from its pegged price of USD $1.00 to an all-time-low of around USD $0.87 per coin. While this might not seem to be significant, it is important to remember that the coin is supposed to function as an on-ramp, allowing investors to safely put their money into more volatile currencies on top exchanges.
USDT eventually made its way back up, stabilizing today at around 98 cents per unit. Still, investors who had previously felt assured that the coin was safely pegged to the stable price of the United States Dollar are very unhappy with the realization that their stablecoin was not so stable after all. In addition to the overall fall in price, a steep decrease in market capitalization has created a significant feeling of doom-and-gloom among holders of the USDT stablecoin.
No True Stablecoin
Oddly enough, none of the stablecoins pegged to the United States dollar seem to be worth exactly USD $1.00, according to a report from Coindesk. PAX is the closest to the United States dollar, with its price hovering at around USD $1.02 per coin. It is followed by USDC at the same price, and then TUSD at USD $1.03 per unit. Sitting the furthest away from the dollar mark is GUSD, who saw an interesting bull run and is currently parked at USD $1.09.
Investors looking to enter the market using the on-ramp of any given stablecoin should be very aware of the ironic lack of stability currently being experienced within the competitive and growing stablecoin market. As the coins attempt to get their bearings amid the biggest peg-break of 2018, it is unclear which coins—if any—will substantiate themselves as the frontrunners in a clearly necessary industry within the crypto markets.