Five Myths about Stablecoins

“When an investor focuses on short-term investments; he or she is observing the variability of the portfolio, not the returns – in short, being fooled by randomness.” – Nassim Nicholas Taleb.

Therefore stablecoins, like most cryptocurrencies are a purely speculative asset. Stablecoin speculators bet that these assets will work as advertised. If stablecoins fail the speculators will lose their money.
Thus, stablecoins are an inherently risky asset based on unproven technologies and business models. Thus only people who can afford to lose money should buy stablecoins.

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What Value does Ox (ZRX) have?

Moreover, Ox is being tested with stablecoins or Stable Tokens. In detail, a stablecoin is a cryptocurrency pegged to a fiat currency such as the pound. Theoretically a pound stable coin will be worth £1, for example.

Obviously, stablecoins will have enormous appeal because fiat currency supposedly guarantees the price. Strangely, stablecoins will be most popular in countries with lousy fiat currencies. For example, Venezuelans could use a stable token to accumulate and spend US dollars.

Uniquely, Coinbase ranked the Tether (USDT) stablecoin as the 10th most valuable cryptocurrency on 7 November 2018. Additionally, Tether like Ox is available through Coinbase. Therefore stablecoins are a proven concept with proven value.

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The Biggest Challenge for Cryptocurrency

Therefore, the greatest opportunities for cryptocurrency in North America are central bank issued crypto coins, and altcoins linked directly to fiat currencies.

Not surprisingly, American companies are behind stablecoins (fiat-backed altcoins) like Tether (USDT) and the Dai (DAI). Individuals could use stablecoins as a savings or as a hedge against inflation. An obvious use for stablecoins is transmitting money to and from other countries.

Other opportunities include protocols that quickly convert cryptocurrency into fiat currency. Notably, the most promising of these is Uphold.

To explain, Uphold is an application programming interface (API) that enables fast conversion of currencies. Uphold currently converts major cryptocurrencies like the Swiss Franc and the US Dollar.

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Is Tether (USDT) a Good Cryptocurrency?

Tether’s Coin Price raises serious questions about the whole concept of stablecoins. There is no direct conversion between Tether and the dollar.

Indeed, a person converting Tether (USDT) into greenbacks lost 1.22¢ on the transaction on 19 October 2018. That will convince many that conversion mechanisms like Uphold’s API are a better deal.

A logical conclusion is that the market prevents one-on-one conversion of Tether. To explain, Tether or exchanges have to buy dollars on the market for conversions. Hence, they have to pay the market rate for dollars.

Moreover, the exchange or Tether charged the market Coin Price for USDT. Under those circumstances, a one-on-one conversion of Tether is impossible.

Another conclusion we can make is that stablecoins are impossible. To explain, it is not possible to create a cryptocurrency with one-on-one conversion.

One-on-one conversion is impossible because Mr. Market controls the price. The only to change that is to keep altcoins off the market. That is impossible because anybody can sell cryptocurrency anytime.

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What is the Stronghold USD Cryptocurrency?

The potential value of $1,421 that CoinMarketCap assigned to Stronghold USD on July 25, 2018 is purely theoretical. Investors should wait until the Stronghold USD Beta tests are completed to buy Stronghold Hold or Stellar Lumens (XML).

One obvious problem with Stronghold was that the only active markets for it are in Stellar Lumens (XLM). Coinmarket listed two coin pairs as “active markets” for Stronghold on July 25, 2018.
They were XLM/BTC (Bitcoin) and XLM/ETH (Ethereum). The XLM/BTC market was worth $1,363 less than the “Coin Price” of Stronghold on 25 July 2018. The only activity registered for XLM/ETH on the same day was $68. Therefore Stronghold’s Coin Price was purely theoretical and should be ignored by speculators.

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