🌓 Stablecoins. Is it worth to keep money in USDT?
Stablecoins are cryptocurrencies attached to other currencies such as fiat money or other cryptos.
There are three types of stablecoins according to the original currency: fiat-backed, crypto-backed and algorithmic stablecoins.
💲 The reason people love stablecoins is that they are not subject to volatility. Fixed prices that’s a real crypto dream! When the whole market is in a red price stablecoin holders are cool-headed and secured.
USDT stablecoin is the third currency in the rate after Bitcoin and Ethereum with a market cap of $65,958B and a daily turnover of $48,516B.
💲 Such currency is used for simple and fast money transfers, day-to-day payments, hedging portfolios and even getting interests at an attractive APR.
While USDT is considered a stable asset and is backed by USD in a proportion of 1:1 its course went down once to $0.9485 in the last 90 days.
💲 According to Santiment research, addresses holding between $100,000 and $10 million USDT are close to three-year lows in supply.
The trend comes amid a growing number of traders dumping USDT in favor of other stablecoins, such as USDC and DAI. As a result, the Curve platform has a serious USDT imbalance in its liquidity pool, as more traders swapped the coin for other tokens.
Traders and investors lose faith in the token esp in view of the uncertain nature of its reserves.
🌕 And it began when Luna and linked to it Terra USD dropped to zero and lose a combined market cap of $60B. Terra USD or UST is an algorithmic stablecoin. It’s backed by automated operations meant to maintain a stablecoin’s value by increasing or decreasing its supply and linked with Luna token. 1 UST was defined as being equal to $1 worth of Luna and while the amount of Luna handed over in a swap for UST would vary, a holder of $1 in UST would always get $1 in value back. But one day a demand just started to fall and no one knows the initial reason. All of a sudden, the Terra team removed $150M from the Curve platform to prepare a new liquidity pool and at the same time unknown user swapped about $84 UST to USD Coin on the mentioned Curve platform. So a lot of users tried to withdraw their UST and used to swap them on Luna. That decreased the prices of the tokens.
💲 The next one was algorithmic token DEI that lost in price two times and isn’t backed by USD now.
Despite these problems, stables are still interesting for crypto users including the regions with sanctions on fiat USD. Besides USDT, there are BUSD, a tokenized USD of the Binance platform, DAI, a stablecoin of the MakerDAO platform, USDC and others.
💲 Even Aave, a DeFi platform, is preparing to launch its own stablecoin GHO that will be backed by crypto users collaterals.
🌓 Is it a good idea to hold all your funds in USDT or another stablecoin? Of course not, the crypto market is struggling with huge problems in the global economy and no one can predict the future situation. In any market sentiment the main crypto advice is to diversify your crypto portfolio with different assets of all market cap amounts. Don’t bet only on stables and then you’ll definitely win.