Bitcoin was created with very lofty goals in mind. It was supposed to be a new digital tool to start the deconstruction of the financial system as it was known, following the 2008 economic crisis, but a lot has happened since 2009.
Bitcoin has become what the people have wanted it to become because of its decentralized and democratic process, but this has taken it away from the currency side of things and more into the investable asset side.
This is not too surprising as the goal of Bitcoin, even in the early days where it was supposed to replace the financial system was to attract interest and gain adoption. But, Bitcoin managed this only when it started to take off in price and the volatility got people very excited.
Bitcoin’s run up to $20,000 was a snowball effect as it gained notoriety as the price climbed from $1,000 through the year, but as the price grew, so did the adoption as people looked for a get-rich-quick scheme.
Volatility now is the double-edged sword for bitcoin for without it there would not be the same level of interest or the same growth and adoption, but it has also held back Bitcoin from fulfilling its prophecy. This is why, it seems, that something like Tether may be the answer to doing what Bitcoin set out to do.
Stablecoins have been on the rise for a while now, but they have also exploded this year following the Mid-March market collapse that reminded people of the dangers of volatile assets like Bitcoin. Tether, being the first real stablecoin to gain momentum thus may be the answer to changing the financial landscape.
The attraction of stablecoins
Tether has been around for some time now, and it is hard to ignore its space in the ecosystem as the volume stakes are always massively in its favour day today. The usage of USDT is primary and quite basic, but also very sleek as it is a functional digital currency system that can replace some of the currency financial ways.
This model from Tether is now being replicated by a number of other crypto companies, as well as crypto exchanges, but also even central banks — and this is the true identifier that stablecoins could be the next iteration that could fulfil Bitcoin’s original plan.
The growth in interest from central banks to launch their own Central Bank Digital Currencies (CBDC) shows that the notion of a blockchain token that has a stable value, rather than Bitcoins volatility, puts it onto the spectrum of a currency and away from the asset class.
With this, there can be a big switch harnessing the potential of these blockchain tokens and utilizing their cross border capabilities and reinvesting a large portion of the financial system. It is unlikely, as it stands, that these stablecoins are ready to replace the current financial system, but they can replace parts of it.
Supplementing the dollar, not replacing
Bitcoin was supposed to become the new world currency and replace the Dollar, but this does not look like it will happen, and for stablecoins, this intrinsically cannot happen. USDT is a dollar-pegged stablecoin and thus it could well be supplementing the power of the dollar rather than taking it away.
The power of a truly digital dollar, not tied to the US and its regulators, but still fully backed means that there is much more liquidity and a lot more access to people who may not be able to get their hands on it.
The dollar is still the most powerful world currency and to have access to USDT in countries across the world there will be a big advantage to the US currency. But, in saying that, the Chinese government is the one country working on their own CBDC that is way ahead of everyone else and their own coin could take a lion’s share of the US stablecoin market