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Your Guide to Stablecoins 2019

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Stablecoins are cryptocurrencies with a value pegged to a currency or to exchange traded commodities. Many projects today are researching and developing such technology. Issuers distribute stablecoins to customers in exchange for fiat currency such as USD at a 1:1 fixed exchange rate. USD is a desirable medium of exchange and globally accepted unit of account, making it a good choice for a stablecoin. Stablecoins most often take the following shapes.

  • Fiat-collateralized: Reserves in a national currency collateralize the creation and issuance of such tokens. The goal is price stability by pegging a token’s value to a reserved fiat value.
  • Crypto-collateralized: Cryptocurrencies backing cryptocurrencies. That might sound far fetched or futuristic, but it is possible in the present day. Forget the Gold Standard. Now you can hold a cryptocurrency backed by a basket of cryptocurrencies.
  • Seigniorage: These tokens are not-collateralized. Software maintains the price stability.
  • Hybrid: When you blend the three basic approaches above – or some assortment thereof – you get a hybrid stablecoin.

Let’s go deeper.

Fiat-backed

Fully-backed by fiat money at a 1:1 ratio, you might receive $1 of fiat-backed stablecoins in exchange for $1 of fiat money. Custodians (third-parties) typically manage the fiat in such an arrangement. In order to maintain a stable price, fiat-backed tokens may be issued or destroyed as needed. When holders redeem cash with tokens, for instance, the company might wire money to a bank account, then destroy or otherwise remove the tokens from circulation so as to maintain the fiat currency peg.

Tether (USDT)

Tether’s daily volume on January 18 was $189,134,405. Traders use tether as a way to hedge and to convert holdings into the equivalent USD value without having to cash-out. Detractors argue that Tether lacks transparency when it comes to reserves, though the company claims all issued USDT tokens are backed on a one-to-one basis. The CEO of Bitfinex is also the CEO for Tether Limited, which issues Tether.

TrueUSD (TUSD)

TrueUSD claims to be more transparent than Tether, while still enabling TUSD customers to exchange USD through an escrow account over which the TUSD team claims to have no control. The company uses smart contracts to ensure the 1:1 parity between real USD reserves in the escrow accounts and the TUSD tokens issued.

Gemini

Gemini took a different approach than most stablecoins, receiving permission from the New York Department of Financial Services (NYDFS) before creating its USD-pegged stablecoin. Designed to provide traders and institutions with a “regulated” version of tether (USDT), Gemini claims their stablecoin establishes trust through cryptographic proof and regulatory oversight.

Gemini’s ERC20 stablecoin includes an “upgrade feature, an offline approval mechanism for high-risk actions, and a hybrid online-offline approval mechanism for high-risk actions and token issuance that provides the desired level of security and flexibility.”

Gemini links licensed financial institutions and examiners. They form a network of trust that backs the Gemini dollar. This regulated stablecoin is to serve as a medium of exchange and unit of account for centralized and decentralized applications. Gemini has pledged to create a network of trusted and licensed financial institutions and examiners. These implementations combined form the Gemini dollar, a regulated stablecoin that can serve as a viable medium of exchange and unit of account for centralized and decentralized applications.

Gemini’s proof-of-solvency is also a unique selling point requires a trusted third party. It plans to have the audit committee of the board of directors of Gemini engage an independent registered public accounting firm to attest to the underlying US dollar balance.

Paxos Standard

Paxos Standard is built upon the Ethereum blockchain as an ERC-20 token. Rather than issuing new money to maintain price stability, as past coins have attempted, Paxos Standard provides a more stable representation of existing money with accepted and trusted value. The company posits early use cases for the technology as a payment means; hedge against volatility; contracts for more complicated transactions, and more. Longer term use cases include asset mobility and settlement and ecosystem development.
Centre

CENTRE is creating a network scheme to manage the creation, redemption and mechanisms enabling issuing members to mint and burn/redeem asset-backed fiat tokens, ensuring price stability. CENTRE’s fiat-collateralized approach entails a unit of tokenized fiat currency being backed by one unit of reserved fiat. According to CENTRE, Circle will become a “licensed member of the CENTRE network”, but an independent entity will govern and develop CENTRE protocols separate from Circle.
Commodity-Backed

Commodity-backed stablecoins are pegged to a specific value of, say, gold. One token, for instance, might represent one gram of gold. Physical gold is often claimed to be stored in a trusted third party vault. BitShares was one of the first projects to introduce a commodity-backed stablecoin. Backed by real assets and redeemable at the conversion rate of the real asset, commodity-backed stablecoins try to maintain the stable value of gold, while being easily transferred.

Digix Gold Tokens (DGX)

Digix has two tokens. Digix Gold Tokens (DGX) and DigixDAO Tokens (DGD). DGD tokens are used for DigixDAO’s governance model. DGX tokens are used as collateral and a trading pair by other crypto projects like MakerDAO, Kryptono Exchange, Kyber Network, WeTrust, Monolith, and others.

A Digix customer might buy gold through the Digix platform. The vendor then supplies gold and a custodian stores the customer’s gold. Relevant details (vendor, custodian, customer, etc.) are stored on a digital card, and sent to smart contracts so new, gold-backed coins can be minted.

DGX, created by DigixGlobal, is an ERC-20 token backed by physical gold. Fully-audited and stored in a vault in Singapore, the Safe House, each token’s value is fully redeemable and pegged to price of gold. Digix’s Proof-of-Provenance algorithm ensures that each gold bar’s custodianship status is tracked on the Ethereum blockchain. Reserves are audited each quarter.

Cryptocurrency-Backed Stablecoin

Backed by other cryptocurrencies, crypto-collateralized cryptocoins can be less stable than fiat and commodity-backed stablecoins because the underlying asset is less stable. Cryptocurrency-backed stablecoins might sometimes be over-collateralized to account for the volatility. While a US-backed stablecoin might be pegged 1:1, an Ethereum-backed stablecoin might be worth 2:1. (US $2 worth of ethereum for US$1 worth of stablecoin).  Still, cryptocurrency backed stablecoins are more volatile than stablecoins backed by other assets like commodities and fiat money.

Usually backed by a basket of cryptocurrencies instead of a lone currency, some such stablecoins require users to stake and lock cryptocurrency via a smart contract to create a fixed ratio of stablecoins. Considered a more decentralized alternative to fiat and commodity-backed stablecoin, cryptocurrency backed stablecoins offer quick liquidation from one cryptocurrency to another.

MakerDAO (DAI)

Maker, a smart contract platform based on the Ethereum platform, stabilizes the value of Dai, a collateral-backed cryptocurrency, through a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and appropriately incentivized external actors.

Collateralized debt position are smart contracts on the Maker system. CDPs keep track of assets deposited by users so that users can generate Dai. The value of an active CDPs collateral is higher than the value of the debt. Ether is used as collateral for new coins, and must be sent to a CDP, which locks the staked ETH so new DAIs are minted. Dai is designed to be sent to others, used as payments for goods and services and held as savings. MakerDAO also issues MKR token.

Seigniorage-Style Stablecoin

Seigniorage-Style stablecoins are uncollateralized and stabilized by algorithms. Algorithms might maintain the value and stability of a coin by controlling the supply of the uncollateralized stablecoin, shrinking and growing it based on certain indicators.

Seignoriage-style coins’ algorithmically governed approach to expanding and contracting a stablecoin’s money supply. New stablecoins are minted to maintain stable prices, when, say, demand increases or decreases.

Conclusion

Technologists claim that stability offered in stablecoins would be a boon to cryptocurrency by minimizing fluctuations of value. A stablecoin theoretically represents a stable means of payment and trade, making it appealing for daily use, and perhaps more palatable for the general public. Yet, stablecoin technology is still nascent, and questions such as how to manage supply and demand in such a way as to create stable value have yet to be fully answered and understood. Of the coins listed here, Digix, Gemini, MakerDAO and Paxos represent under-publicized products on which to keep an eye.

Image: Artem Beli

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 2 rated postsJustin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.




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XRP Price Analysis: XRP/USD Could be in Serious Trouble as Test of Major Support Back in Play

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  • Ripple’s XRP price is seen trading marginally in negative territory towards the latter part of Friday, with XRP/USD heading for a weekly closure in the red.
  • Ripple has announced a newly improved XRP Ledger 1.2.0 for improved censorship resistance.

XRP/USD: Recent Price Behaviour

Ripple’s XRP price continues to cool, running towards is a third consecutive session in the red as the bulls fail to sustain any upside. XRP/USD has dropped more than 5% over the mentioned period, with the bears set to the test the big psychological $0.3000 mark once again. The price had not traded below this area since 8th February, when it received a chunky amount of buying pressure.

Ripple Announces Newly Improved XRP Ledger 1.2.0

Ripple, the San-Francisco-based blockchain startup, released an updated version of its XRP ledger 1.2.0. The update is expected to significantly improve user experience, in addition to expanding upon the range of services within its offering.

Details provided by the Ripple team suggest that this update has seen its resistance to censorship improve. In other words, a single entity will not be able to decide success or fail. No one will have the ability to alter any transaction once added to the ledger.

Moreover, the upgrade has introduced the MultiSignReserve amendment. Ripple has further streamlined the process, reducing the number of barriers for those involved in signing the transactions. The amendment will now allow just a reverse of 5 XRP, in comparison to the prior of between 15-50 XRP.

The blockchain startup has also announced a bounty program, inviting developers to review their updates in the new version. Should any vulnerabilities or errors be detected, Ripple will reward those who communicate such to them.

Users of the ledger should update to the latest version before 27th February 2019. It is critical that users complete the upgrade, as the server will not be able to determine the authenticity of the ledger. Without the upgrade, transactions will not process and cannot be submitted.

Technical Review – XRP/USD

XRP/USD daily chart.

Last week, the XRP/USD bulls managed significant double-digit gains of around 11%, breaking out of a descending wedge pattern formation. The bearish structure had contained price action since the back-end of December 2018. It was forced to drop around 30% while moving within this wedge after such a promising initial recovery started from the middle of December.

In terms of support to the downside, eyes will be on a retest of the upper part of the wedge pattern. It can be seen tracking around the high-mid $0.28000 region. A significant buying area is also in proximity, ranging from $0.3000 to $0.2500; an area that has on several occasions proven to attract decent sized buyers. Any failure of this providing necessary comfort will expose $0.2000 as the next target.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Stellar Price Analysis: XLM Bulls are Back as Coinsquare Acquires StellarX

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  • XLM/USD is trading up around 4% on Friday, with the bulls looking to break out of a narrowing daily range.
  • Canadian cryptocurrency exchange has acquired StellarX, a decentralised platform.

XLM: Recent Price Behaviour

Stellar’s XLM has seen a pick-up in bullish momentum in the session on Friday, having jumped around 4% at the time of writing. The price has managed to stabilize somewhat after producing all-time lows down at $0.07318000. XLM/USD had remained within an extremely stubborn trend to the south, following the bears smashing out of a pennant structure. The price had been confined since from early December 2018 up to 20th January, when the breach occurred. As a result, a fresh wave of selling pressure hit XLM, forcing the mentioned new bottom.

Coinsquare Acquire StellarX

Canadian cryptocurrency exchange Coinsquare has acquired the StellarX decentralized exchange. StellarX is a trading platform built by the developers of the Stellar blockchain. The platform was initially launched in July 2018, offering fast transitions, zero costs, and a wide range of asset classes that include crypto, fiat and commodities. XLM is used as the base currency for trading across the decentralized exchange.

The camp at StellarX detailed the announcement via Medium, specifying that they will still be pressing forward with the outlined roadmap noted back in September of last year. StellarX detailed that the reason for the acquisition is to make way for the exchange to maximize its full potential. The platform will be able to leverage the sizeable regulatory experience that Coinsquare has, with their visions to build around the platform. It is worth noting that the Canadian exchange has a network with regulators in Canada, the United States, and Europe. Additionally, Coinsquare also previously managed to secure a relationship with one of Canada’s big five banks, the Bank of Montreal.

Moreover, Coinsquare already has experience with the Stellar network; it previously acquired BlockEQ in the back-end of last year for $12 million. Moving forward, StellarX is going to be led by BlockEQ’s co-founder Megha Bambra, with the sights to continue growing and enhancing the Stellar ecosystem. BlockEQ is a private Stellar wallet which allows users to have total control of their funds via a private key. The wallet is accessible on both mobile and desktop.

Technical Review – XLM/USD

XLM/USD daily chart.

XLM/USD has managed to find its feet after resuming the downside pressure seen throughout 2018 and carried into 2019. This year the price has dropped as much as 45%, due to the crypto market-wide cooling. Should the mentioned bottom area $0.07318000 remain intact, eyes will be on a retest of the breached pennant pattern structure. The bulls must breakdown a small resistance barrier, which is the upper part of the past fifteen trading days range.

Furthermore, the lower part of the pennant is tracking at $0.11150000; a move back here would complete the breakout and retest. Lastly, if this resistance holds firm and rejection occurs, then it could very well make way for another wave of selling pressure.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Binance Coin Price Analysis: BNB Profit-Taking Kicks In as Binance’s Business Continues to Defy Cryto Winter

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  • BNB/BTC produces a double-top pattern formation, leaving the door open to further downside pressure.
  • Binance CFO confirms that the organization is still profitable, despite the ‘crypto winter’.

Binance Coin Price Behavior

The BNB token has been outperforming many of its peers over the past few weeks. Since the week commencing 3rd December, BNB/USDT has rallied a chunky 115%. The price recently pushed to its highest levels seen since June 2018, peaking around $0.0027000. Given the prolonged consecutive run north, it isn’t too surprising to see a cooling.

Observing where the price peaked earlier in the week on 12th February, BNB/USDT produced somewhat of a double-top formation. The high was very much in proximity to the top on 17th June 2018. Playing out to the textbook, the market bears piled in after reaching these heights again, as investors took profits following the strong run north from December 2018. As a result, the price is running at its third consecutive session in the red.

Binance Remains Profitable Despite Crypto Winter

The CFO of Binance Wei Zhou was recently speaking in an interview with CBNC, where he commented on the company’s position within the current market downturn. Zhou said, “To date, even in this bear market, we still run a profitable business”. Binance is known to not publicly disclose its financial performance; however, in the past, it has provided several hints that would suggest the business is financially secure.

Back in the summer of 2018, Binance CEO and Founder Changpeng Zhao (“CZ”) disclosed that the exchange’s revenue for the first half of 2018 was roughly $300 million. He did additionally project at the time that net profit would hit between $500 million to $1 billion by the year’s end.

It has been estimated that Binance achieved $446 million in profit last year. It has also been estimated that the Binance ICO offering back in 2017 saw the company raise $15 million for 100 million Binance Coin (BNB) out of 200 million in total supply. Additionally, as part of maintaining its coin, Binance uses 20% of its net profits to buy back BNB and eventually destroy 100 million BNB tokens, according to the whitepaper.

Technical Review – BNB

BNB/BTC daily chart.

Given the recent price developments, there are a couple of bearish confluences to back the bias south. A bull run occurred in such a short space of time, resulting in the price entering overbought territory. Elsewhere, as earlier detailed, the BNB/BTC is playing to the textbook after the double-top formation. The downside pressure could soon drastically pick up the pace, with eyes looking down towards the possible neckline of the technical pattern.

In terms of support, the range of $0.0014000-$0.0012000, which is the potential neckline of comfort, is part of the double-top textbook pattern. A failure of this area holding could see a fall down to 0.0008410, the low of March 2018.

BNB/USDT daily chart.

Looking at BNB/USDT, the bulls ran into massive supply heading into the big psychological $10.00 mark. The price has not comfortably traded above this level since October 2018. This time last week, BNB/USDT managed to break out to the upside from an ascending wedge pattern. There is room for a potential retest of this level, completing the breakout and retest. Support will be sought just on top of the breached pattern, tracking around $7.4000.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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