Are Stablecoins really pipedreams?

Are Stablecoins really pipedreams?
Table of Contents

There is no denying that stablecoins have been a bone of contention for years. The entire cohort of this digital asset has been a subject of discussion papers and massive regulatory scrutiny from watchdogs around the world. 

During the past week, it was not just Bitcoin [BTC] that was in the spotlight. Stablecoins also witnessed tremendous attention and not in a good way. After the United States Securities and Exchange Commission [SEC] Chairman Gary Gensler participated in Congressional Hearing, it was only natural that speculations regarding new regulations against the sector growths emerged.

Are Stablecoins really pipedreams?

When the former investment banker took up his current position back in April this year, the industry was looking for a positive change in the federal agency’s stance. But little did the community know that they were up for a disappointment as Gensler would share a similar hostility just like his predecessor towards cryptocurrencies.

According to the Chairman, many cryptocurrencies including stablecoins, whose price is pegged to a fiat currency or a basket of assets, are securities. It was one of the loudest statements to come from the SEC and was enough to open a can of worms in the hustling crypto Twitter. 

Stablecoins, suppressed volatility, and hyper volatility

Tuur Demeester, for one, believes that stablecoins are pipedreams. The founder of Bitcoin alpha fund Adamant Capital and a longtime proponent of BTC, Demeester said that when volatility is suppressed, it only results in hyper volatility. His tweet regarding the same read,

“Imo stablecoins are pipedreams – suppressed volatility will always lead to hyper volatility. If you want to adjust for the increase in purchasing power of your money, have the payments of your contract taper over time, or be dependent on certain variables to adjust for the risk.”

Are Stablecoins really pipedreams?

Demeester’s latest response comes after Coinbase CEO Brian Armstrong took a dig at fiat-backed stablecoins. The exec asked the community that if fiat-backed stablecoins really become inflation coins, which is not stable, “then how will we get a coin that is truly stable?”

Armstrong addressed concerns regarding stablecoins being just as vulnerable to inflation as fiat currencies. For Twitter CEO, Jack Dorsey, it’s always- “Bitcoin fixes this.” But this time, the Coinbase CEO was not in the same boat. While Armstrong argued,

“Bitcoin is deflationary, which is also very important. But that’s not the same as having flat pricing – which is useful for long term contracts, trading pairs etc.”

The latest conversation on Twitter depicts the general sentiment of rising dissatisfaction among crypto proponents. Many industry experts are of the opinion that the governments across the world are hindering innovation, and are lagging behind when it comes to providing clarity to the ecosystem. 

Inflation is a global issue. Several developing nations have grappled with hyper-inflation. The UK economy has welcomed the inflation party according to Hugh Gimber, who happens to be the global market strategist at JPMorgan Asset Management. The pandemic-triggered inflation in Germany has also left the Chancellor Angela Merkel worried.

RELATED POSTS

Follow us on Social Networks

Crypto Tutorials

Crypto Reviews

Ads