Gemini have managed to launch the Gemini dollar. This is a currency that is actually pegged onto the dollar but it has been built and established on the blockchain. This means that it can easily be transferred to the Ethereum network and it is also subject to a much higher regulatory standard when you go ahead and compare it to other coins such as Tether for example. So the truth is that it is a useful innovation but it is a poor investment option to say the least. Stablecoins may fill in an interesting role when it comes to digital money and even fiat currencies as well. This is especially the case when you look at the US Dollar. You do have to remember however that there does seem to be a technologically valuable role that is going to be played here. The United States Dollar is a standard unit and it is accounted for just about everywhere. Pricing things in Bitcoin for example can easily create a ton of complications and this is especially the case when you look at the simple contracts. If you were told for example that a bottle of coke is going to cost you $2 then you will probably have a very good understanding of what that means. If you were told that the same bottle of coke is going to cost you 0.00032 Bitcoin however then the mental math of having to work all of this out will be much trickier indeed. In this way, stable coins may be able to create a platform that is then used for even more innovation. This is especially the case when you look at other currencies and even digital contracts as well. Nonetheless, it has been a downbeat year and a lot of currencies have halved or even worsened at the time of writing this article. Some people however are praising stablecoins because they believe that they have a much lower prospect of volatility when compared. That is the wrong conclusion here and you should not look at it in this way. For example, it is not about the value of the stablecoin that you need to be focusing on. Any financial asset is much less volatile when compared to other cryptocurrencies and this is especially the case when you look at how things have progressed over the last couple of months. Stablecoins are far less volatile when compared to other assets but this is not much of a statement at all. Anything is less volatile when compared to a lot of other assets but you do need to think about the bigger picture here.
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So what is wrong with the US dollar? There is very little reason for you to believe that stablecoins are good investments. The main reason for this is that the US dollar has been a poor investment to say the least and this is especially the case when you look at the history of it. One of the most interesting promises of a cryptocurrency is the fact that it is completely decentralised. The government are not able to create more currency when they have a bill that they need to pay. This is a good thing, because when governments have the chance to print out as much money as they need, it then dilutes the value of the currency and this can mean bad things for the economy. So if you owned a dollar 1918 then a century later you would only be able to buy 6 cents. This is a huge drop but at the end of the day, a dollar is still a dollar. The problem is that what you are able to buy with that dollar is far less and that is what you need to be focusing on. The value of currency has been declining over quite some time and some have been going down much faster when compared to others. When you look at the US you will see that this is actually one of the better currencies but the same cannot be said for Zimbabwe. This just goes to show what happens when a ton of money is printed out. The currency value then falls to zero and if you have a stablecoin that happens to be tied to the US dollar then you are forcing it in the same way to become a bad investment. The US Dollar may be far less volatile when compare to other currency assets but at the end of the day, it is indeed included with fiat currencies. Either way, being better than other bad investments does not make that a good investment and when you peg a stablecoin, or a coin that has a problem with a currency that has an issue with centralisation then you will soon find that most of the benefits are in fact lost. Some of the decentralised benefits of most currencies are also then lost but it is important to know that stablecoins are very useful and they are also able to offer so much to the user.
So of course, it is important to now that stablecoins do have a huge part to play when it comes to financial innovation and it has continually been drawn to as being an investment. When you look at how stable it is you will see that this doesn’t make any sense as well. It is worth considering that this has an asymmetry inherent coin. Sure, a stablecoin may have the ability to hold its value over a long period of time but at the end of the day it does have an underlying asset. This could happen through lack of use and therefore you need to have a clear understanding of this if you want to invest. If you do happen to have an undesirable setup then a stablecoin may be indeed worth a dollar but when you look at the bigger picture you will see that it can easily be traded for less. When you look at stablecoins you will see that the only thing that you are doing is taking on far more risk. This is far different when you look at the other currencies that are around and this is especially the case when you look at the symmetrical risk involved. Of course, when you take this into account you will soon see that they can rise and fall in the same way. The Gemini dollar and even the process that is behind it requires very little work but even with that there is very little room for improvement as well. If you were able to solve this then you may find that more benefits come to light but it is impossible to solve situations like this because it is all tied to a set currency. One day it might work, the next night it won’t and this can cause you major problems in the future. A stablecoin, even in the early days, is really like flipping a coin. Normally with investments, the prospect of it going up is the same as it going down but with this, that is just not the case at all. Stablecoins have very little upside and they do come with a ton of downside risk. The idea of investing in them doesn’t make much sense at all and they are not able to establish any kind of credibility if they keep on going the way that they are right now. Of course, they do have a very important role to play and the digital currency contract is certainly making some positive movements but when you look at stablecoins in general you will soon see that they are generally filled with bad news so you should avoid them as much as possible.