The Stablecoins - Issue #20
The Stablecoins - Issue #20
In this newsletter, we are profiling stablecoins. In previous newsletters, we have profiled Bitcoin, Ethereum, Litecoin, Polkadot and many others. Access all our newsletters in our archives at madcapx.substack.com.
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The Short of It
The US dollar is widely considered the dominant world currency. USD’s dominance also translates to the major stablecoins. There are no large stablecoins based on Euro, British Pound or any other coin besides USD. You may wonder why the US was so taken with Facebook’s Libre, not to have it see the light of day, while USDT continues to have no issues in continuing to operate.
Portfolios
This portfolio section gives you an idea of what sort of return you can get when investing in crypto assets.
BTC/USD FUND is up 372% since October 1st, 2020. Since this is a long-term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long-term hold position as our best stable alternative. This past week bitcoin has been ranging between $49,450 and $52,640 USD in value.
FUND 3 started on November 16, 2020, with $1000 USD in value and invested into BTC, LTC, ETH, and ADA. The total amount of BTC value from the four coins has a gain of 45% since the start but down 10% from last week. USD is up 343% since the start. We will hold these positions to see how well it does against our BTC-only portfolio. LTC is in the minus by 15% against BTC. ETH rose from last week is up 23% against BTC since the start. ADA has a gain of 254% since the start against BTC and 969% against USD.
BLWX Fund started on February 22, 2021. They all are assets we have profiled in the last few months, and we are interested in how they will perform in 2021 against BTC. BAT is up 32% against BTC since the start; LINK is up 4%, WAVES is -3%, XMR is -1%. Overall, against BTC, the portfolio is up 8.12%. Last week it was in the minus of 8.14%.
Overall, Bitcoin should be your first choice as an investment in crypto, though many altcoins can give you amazing gains if you manage your risk. As a long-term investor, we see it as our largest portfolio investment. Madbyte does have its own token called MADX and is available within our member website.
Profiling
Stablecoins belong to a class of cryptocurrency that attempts to offer price stability and are collateralized by equivalent amounts of fiat assets. All reside as ERC20 tokens on the Ethereum blockchain, with only Tether currently available on alternative chains.
We will briefly look at seven of the most popular stablecoins in use today, starting with the largest (having the most in circulation) and going smaller.
First up is Tether (USDT), with more than 36 billion in circulation. Originally launched as Realcoin in 2014 and residing on the OMNI layer of Bitcoin, they started trading as Tether in 2015. As they were the first, they are often the best choice for most liquidity and availability on many exchanges. Tether has also been implemented on second layers of coins such as Bitcoin, Bitcoin Cash, EOS, Tron, Algorand and OMG. They are managed by Tether Holdings Limited and have a connection to Bitfinex in Hong Kong. The US Fed investigated them in 2018 for possibly pumping the price of Bitcoin. Official investigations have since wrapped up, but many remain concerned as their funds have never been fully audited by a third party.
The second is USD Coin (USDC), with over 8 billion in circulation. Launched in 2018 by the Centre Consortium, comprised of Circle and Coinbase, and investors such as Bitmain. USDC is fully regulated.
Third, we have Binance USD (BUSD), with over 3 billion in circulation. Launched in 2019 and managed by Binance (in partnership with Paxos), BUSD is approved and regulated by the New York State Department of Financial Services. Binance was originally founded in China but has since moved headquarters to Japan and Taiwan.
Fourth is DAI Coin (DAI), having over 2 billion in circulation. Issuance and development are managed by the Maker Protocol and the MakerDAO decentralized autonomous organization, meaning no single entity is in control. It is collateralized by a mix of other cryptocurrencies deposited into smart-contract vaults every time new DAI is minted. MakerDAO itself was originally founded by a Danish entrepreneur, Rune Christensen, in 2015.
Fifth, there is Paxos (PAX), with over 675 million in circulation. It was launched in 2018 by Paxos Trust Company, a New York-based entity. Funds are fully audited and regulated. They also have PAXG, with is pegged against the value of gold. Paxos can pause transfers and approvals as they see fit.
Sixth is True USD (TUSD), having over 293 million in circulation. Launched in 2018 by TrustToken, a California company along with a number of other country-specific currency pegged tokens such as TGBP, TAUD, TCAD, and THKD. TrustToken is known to emphasize the importance of independent verification of funds.
Finally, the seventh is Gemini Dollar (GUSD), with over 120 million in circulation. It was founded by New York-based Gemini Trust Company, a Tyler and Cameron Winklevoss collaboration. GUSD was actually the first dollar-backed stablecoin to get approval and backing from a U.S. regulatory body. Their funds are examined on a monthly basis by LLP, BPM and independently registered public accounting firms.
Which stablecoin you choose to park your cryptocurrency in during rough seas is up to you, but will usually be dependent on what your trading platform supports. Hopefully, our quick summary of the top stablecoins can assist with making that decision.
Trend Lines
Why invest in a stablecoin such as USDC or USDT? It is typically your safe haven at a crypto exchange when BTC or other cryptos have become bearish. However, another reason is to get a better interest rate than your bank’s savings account. The best high-yield online savings accounts I could find on Bankrate.com was 0.6%. Compare that to BlockFi at 8.6% and Celsius at 10.51%.
If you enjoy getting compound interest and are not all invested in Bitcoin or some other altcoin, why not get your money working for you, making some extra cash. Blockfi pays out every month, and Celsius pays every Monday.
If you put $10,000 in savings at 0.6% for 30 years, it will earn you $1971 in compound interest. At 10.51%, that same 10k earns you $220,870.
How are Bitcoin and other leading crypto assets trending on the daily charts?
BTC/USD did a second correction in its bullish trend of 26% from $58,350 down to $43,000. The MACD is getting close to a bullish crossover. Is bitcoin ready for another push for a series of all-time highs in March? Some are predicting that it will hit $100,000 by the middle of 2021.
ETH/BTC chart showing good bullish support since early 2020. We can see once again how that support line bounced it back up a few days ago. The MACD also did a bullish crossover 3 days ago.
LTC/BTC is getting no breaks from the bears. It has been heading downward for over one year. But if we look at the monthly chart back to 2015, you will see LTC has been here before at about the same time frame in between halvings.
Will LTC/BTC see another breakout before summer. One prediction puts us from the current $185 USD to about $500 later this year or as early as mid-2021.
ADA/BTC has been on a tear to get as high as the top 3 in market cap value in late February. Though now it has fallen to 5th since correcting 30% from the highs. Can this support line hold and bring it back into the top 3 in the next month or so? There are high hopes for Cardano to challenge Ethereum, which is 6 times bigger in market value. Some predictions put ADA value from the current $1.21 into the $3-5 by the end of 2021.
About
MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites. This weekly newsletter is a paid subscription and supports the team and the Madbyte projects. The regular cost is $5/month or $50/year. Cancel anytime.
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Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.