For anyone introduced into the cryptocurrency market concept, instability (or volatility, in a more professional language) is a synonym of it. In the last 6 months, the market capitalization of the cryptocurrency space has been a "frightening" rollercoaster ride from 100 to 800 billion dollars and everywhere in between.
Volatility and risk were considered as the main reasons why institutional and more Conservative retail investors are still avoiding entering the cryptocurrency market, as the cypherical features mentioned are less attractive to their traditional investment behavior, which it must be stable.
In an attempt to correct this market inefficiency, institutions and developers have initiated the issuance and functioning of cryptocurrencies anchored to values outside the cryptocurrency marketphere. These coins are known to the general public as stable coins.
Lately, stable coins have thrown on the table about their use, credibility and security. And what made them particularly valuable is that they solved the main cryptocurrency flaw: volatility. This seemed to be what the whole community looked for so long, unless there was something about society. We are talking about the recent scandals related to two projects: Tether and El Petro.
The Tether is a stable currency anchored at a ratio equal to the US dollar. According to the research of the University of Texas, Tether was used to manipulate the price of Bitcoin and, consequently, is not reliable. Bitfinex exchange has been reported to buy the stable currency and keep its price. In fact, a report that closely examined Bitcoin's prices for a set period of time found that about 50% of the total increase occurred within two hours after a new supply of Tethers to Bitfinex. He determined that up to 80% of Bitcoin's current value could be derived from Tether-based pricing manipulation.
El Petro, on the other hand, is the first cryptocurrency to be issued by a federal government, the Venezuelan government. El Petro is an oil-based token issued as a legal tender form that can be used to pay taxes, taxes and other public needs. El Petro will have three main aspects:
- Means of exchange: it will be used to buy goods and services, pay taxes and other public services. Through digital exchange houses, El Petro can be exchanged for fiat and / r currency used as a payment method for the country's oil through the direct exchange of PTR to the shipment of real oil.
- Digital platform: El Petro will be characterized by a digital platform that will allow to issue and trade cryptographic assets backed by raw minerals
- Savings Bank and Investment: it will be traded through electronic exchanges with trading commissions equal to zero and with the characteristics to be negotiated using atomic exchange technology, in a safe and legal environment.
El Petro came as a solution to the prolonged economic stagnation in Venezuela, combined with a high inflation, which is expected to reach the 13,000% level in 2018 by the International Monetary Fund.
Although the El Petro solution sounds great, many experts express their disagreements. Steve Hanke, professor of Applied Economics at Johns Hopkins University and one of the world's leading experts on hyperflexion said:
"This is a typical smoke and mirror operation in Venezuela – I will believe it when I see it … the problem with the petro is that it is a scam, it does not even have a trade. "
In addition, the Venezuelan parliament claims to have been illegally used to mortgage the oil reserves of the country short of money.
In addition, the well-known The encrypted evaluation site ICOindex.com, which evaluates the Initial Coin Offerings (ICO), has already labeled the El Petro token with "status scam". In particular, because the site's strategy is to evaluate currencies based on their white papers, he stated that while Petro promised to be supported by oil resources, "the technology and mechanisms to do so are not adequately explained."
The aforementioned facts conclude that the debate on stable currencies will continue until the market will expand and will be adequate enough to absorb this type of inefficiency. The mass adoption of cryptocurrencies is the key to addressing this problem. Many experts say that the coins supported by the legal currency should be objective against the same rules that work for the traditional economy. This refers to the company registration process, banking control and business management.
As some startups show, the integration of digital currency into the traditional financial system can be transparent, robust and reliable. For example, the Swiss project Alprockz recently announced the issue of the stable currency ROCKZ, which is supported by the Swiss franc. Facilitating the exit conditions of the cryptocurrency market (ie costs, risks and excessive difficulties), the founders of the company not only release the currency, but are implementing the entire infrastructure with banks, auditors and partners and are doing everything in a way transparent.
Will a new trend establish its position on the market and will El Petro be rehabilitated? Are stable coins the key to mass adoption or another bubble? Although the evidence is still scarce, there is significant evidence to suggest that primary stable currencies have their significant defects. But what will certainly clarify the situation is a clear regulatory policy and the support of companies in the real sector.