Why Stablecoin Selection Matters.

By CryptoChad | CryptoNews; The latest about the cryptoverse | 19 May 2022

The UST de-pegging has shown one thing; not all stablecoins are safe and our selection is vital. Even if they remain stable for a long time they can still show volatility which can mainly be attributed to the coin's code and functions. Do we need to worry about other stablecoins too or they can survive?

In today's article, we are going to learn more about the other mainstream stablecoins, find out their recent price movements and conclude based on which currencies are safe.

Tether (USDT).

Tether is the most popular stablecoin, closely followed by USDC and it's run by iFinex, a company in Hong Kong that furthermore operates the crypto exchange Bitfinex. Tether tokens are tied to a fiat currency at a 1:1 ratio (e.g., 1 USD = 1 USD) and are fully backed by Tether's reserves. All tokens are backed up by dollar-denominated assets. Additionally, Tether publishes a daily report of USDT issued.

During the bear market it has lost momentum. depegging on 12 May as a result of mass withdrawals (estimated to $3 billion). However, it wasn't threatened by any other currency and remained on the 3rd position.

USDT Price

CoinMarketCap chart showing USDT price as of 19 May 2022.

USDT Market cap

CoinMarketCap chart showing USDT market cap as of 19 May 2022.

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USD Coin (USDC)

USDC is the 2nd largest stablecoin created by Circle, a company based in Boston. In terms of operations, USDC and USDT are very similar in that they are both backed by dollar-denominated assets. Moreover, they both publish reports on supply circulation(check out the USDC report here). The sole variation between these assets and those underpinning each stablecoin is their composition.

Unlike other stablecoins, the USDC increased in market cap (over $2 billion) and it never lost its peg.

USDC price

CoinMarketCap chart showing USDC price as of 19 May 2022.

USDC Market Cap

CoinMarketCap chart showing USDC market cap as of 19 May 2022.

Dai (DAI)

Dai is the last currency we are covering and it's smaller than the other 2, however more decentralized. It's operated by MakerDAO, a "peer-to-peer organization founded on the Ethereum network to allow anyone to lend and borrow using cryptocurrency". Decisions are made democratically among MKR token holders. Dai's exchange is supported by overcollateralized loans. The majority of these are in ETH, but USDC, for example, accounts for a significant portion of them. In most cases, this is sufficient to keep the peg, but in extreme circumstances, like in March 2020, the MKR token can be diluted to support the value of Dai.

Dai didn't experience significant volatility even though it lost close to $3 billion in market cap.

DAI Price

CoinMarketCap chart showing DAI price as of 19 May 2022.

DAI market cap

CoinMarketCap chart showing DAI market cap as of 19 May 2022.

Conclusion

The UST de-pegging exposed critical problems in the crypto industry. First of all, it's important to check out the source codes of projects when feasible. The second issue is related to stablecoin governance, as USDC is controlled by an American company while USDT is operated by a foreign entity and Dai is decentralized. Last but not least, I believe these currencies deserve consideration because of how they managed to survive a collapse.

That's all I had for today. I hope you enjoyed the article and appreciated the effort. Now if you ask me about the stablecoins I hold my answer is Tether. I haven't thought about buying USDC or Dai but I would think about that in some time because who knows what's up in the future. Stablecoin diversification is really important, especially in staking where rewards are alluring for less known currencies.

Crypto means freedom and responsibility. Invest wisely!