Will stable currencies ultimately take over bitcoin? According to a new report, the controversial stable coin known as Tether is slated to become the second-largest cryptocurrency by market cap as early as next year, and will only be smaller than bitcoin, but how long will that last?
Is Tether About to Get Much Bigger?
The world of stable coins has doubled in the past few months, and it looks like average traders and retailers alike are getting into the stable coin craze. Even Atari, a video game company, has announced plans to enter the crypto space and unveil its own stable currency very soon. This coin can be used for in-gaming purchases and events.
Stable coins are interesting in that they are cryptocurrencies tied to fiat currencies such as the US dollar, the euro, the yen and the yuan. This is designed to help the said stable currencies avoid volatility, which has become something of a problem in the crypto world. Many assets, such as bitcoin and Ethereum, are vulnerable to price fluctuations that in the past, have caused many traders to lose all they’ve earned.
In 2018, for example, the price of bitcoin fell from roughly $20,000 per unit in December of 2017 all the way down to about $3,500 when Thanksgiving rolled in. That’s a loss of nearly $17,000. To say volatility is a minor issue would be incorrect. Volatility has caused many people to become digital paupers overnight.
Tether is a very controversial coin for many reasons. For one thing, many sources claim it is not backed by the US dollar. In addition, it is widely believed – thanks a to report issued by John Griffin, a finance professor at the University of Texas – that Tether is responsible for the mega drop that occurred with bitcoin at the end of 2018. The currency was allegedly pegged to bitcoin in that many individuals used it to purchase BTC whenever the currency showed signs that it was slipping. This occurred in 2017.
One year later, when Tether owners felt they had purchased enough bitcoin and now had quite a bit of moolah to show for it, they left the bitcoin space in a classic take-the-money-and-run scenario. It took many months for the asset to begin showing signs of recuperation.
A Controversial Coin
Bloomberg senior strategist Mike McGlone explained about Tether:
Tether represents what many of the so-called cryptocurrencies aren’t: a stable form of payment… Indicating demand for a digital version of gold (bitcoin) and a crypto-asset like the dollar, if current trends prevail, the market cap of Tether may surpass Ethereum next year. It should take something significant to stall the increasing adoption of Tether.
Paolo Ardoino – the chief technology officer at Tether Limited – assures investors that Tether is not looking to potentially replace bitcoin but is rather trying to “complement” it.