When any market becomes really volatile, investors start looking for safest investment options to reallocate their investments to. Nowadays, the most volatile market of them all is the cryptocurrency market. Wild swings in this market are some of the wildest anywhere.
This is the reason the need for safe and stable currency is most obvious in this marketplace and it is also well expressed in crypto blogs and social circles. This article deals with the topic of stable coins or stable currencies and provides an overview of the stable pillars and investment options that exist in the cryptocurrency space.
WHAT IS STABLE?
Before we continue, we need to take a look at the current benchmark for stability. It goes without saying that today this is, unfortunately, the good old US Dollar. The world’s largest currency is a synonym for enormous fortunes, riches and wealth. But is this the go-to currency when investors want to consider the actual fluctuation of purchasing power which they want to preserve?
So far it has been that way. Even if the dollar lost or could lose 5%, 10%, 15% or more in one year, people still see it as the most stable currency. It must be said however, that the deep available liquidity in the dollar helps. Nevertheless, it is quite volatile and this is what investors actually accepted as the benchmark for stability.
Table 1: How stable coins compare to eachother and the world’s reserve currency USD.
NEW COMPETITION IN THE CRYPTO MARKET
In the crypto marketplace the strength of the US Dollar can be converted into USDT. Tether offers 1:1 type of conversion between the traditional currencies and the crypto format of the same currency. In Tether’s case it is the 100% cash backed principle which provides the stability against so many other crypto coins, which do not apply this same principle.
Gold has always held the reputation to be able to preserve purchasing power. The clean fact though is that the fluctuation of the gold price makes the dollar often look pretty good. That aside, Xaurum relies on gold to play the role of a stable coin in the space of cryptocurrencies. It includes gold backing in its structure. Although Xaurum is not even close to a 100% gold backed currency, physical gold backing in the reserves of Xaurum do present a portion of total value of Xaurum coin.
Another coin is emerging, called Stabl. Stabl aims to provide a stable link in the Ethereum marketplace against the US Dollar. Not that many details are known about Stabl. It is in development. It will rely on a bot to operate transactions in the smart derivatives contracts of the ETH price to target stability of return. Stabl will use some leverage.
SYSTEMATIC STABILITY APPROACH
For many years another currency was in the making and is now coming forth. The X8 currency takes a different approach to how purchasing power is preserved and how safety is achieved even during events like the Brexit. The main goal of X8 is to achieve greater stability and safety than that of any other individual currency and to offer them at very high levels of available liquidity. It creates this base to be applicable on a global scale and it solidifies all the strengths it has using the benefits of the Swiss financial ecosystem around which it is built.
Unlike any other currency or cryptocurrency the X8 currency is operated by ARM AI, a system which allocates capital between 8 top fiat currencies and gold in real-time. It creates safety through diversification and protection through Swiss architecture and additional physical gold reserve. However, apart from that, it is able to fight inflation because ARM AI creates an important safe natural rate of return, which aims to compete with risk free rate benchmarks like LIBOR.
Cryptocurrency market capitalization has been soaring during the first part of 2017. Bitcoin and Ethereum together are worth more than $65B at the time of writing. They are not positioned as stable coins and they sometimes exhibit phenomenal price volatility. A truly stable currency will go hand in hand together with the biggest names as the market grows and grows and as the investment public becomes more sophisticated as they will opt to store their cash in the safest possible alternative available in the crypto market.