Why the British pound could soon be the most important currency in crypto
Crypto trading relies on stablecoins.
To explain just why stablecoins are so important to trading, Iâm about to add a (long) excerpt from issue seven of my Crypto Wire newsletter below.
But first, I wanted to tell you why Iâm talking about stablecoins today. The reason, is biggest crypto exchange in the world has just launched its own stablecoin⊠priced, not in US dollars, but in British pounds.
This goes against virtually everything weâve seen in crypto trading up to this point. And it could be great news for British crypto investors.
Iâll get to why that is in just a second, but first, hereâs the excerpt explaining what stablecoins are and why they are so fundamental to crypto trading.
From Crypto Wire:
A stablecoin is a cryptocurrency that remains price stable.
For example:
Letâs say today stablecoin x is priced at $1 per coin.
You buy 10,000 stablecoin x for a total of $10,000 keep it for five years.
When you come to sell your 10,000 stablecoin x, after those five years, your 10,000 stablecoin x are still worth $10,000.
I guess that begs the question, why would you ever want to invest in a stablecoin if youâre never going to make a profit when you sell?
You wouldnât, youâd never use it as an investment. But you would use it as a currency, or as a store of value. The exact thing that bitcoin was invented for in the first place.
Which then leads us on to the next question. If youâre an investor, why should you care about stablecoins?
Because of what stablecoins enable.
Stablecoins provide the foundations for the new crypto economy to be built on.
Letâs take a look at some of their main uses
- A liquidity tool for exchanges
Crypto enables people to trade in and out of other crypto assets extremely quickly and extremely easily.
But it takes a lot longer to trade between crypto and fiat. And worse still, many banks are blocking trades to crypto exchanges altogether.
Stablecoins mean you donât have to trade back into fiat to take a profit or to cut a loss.
You can simply trade into a stablecoin, instantly and at virtually zero cost.
You can even deposit your money on to an exchange and change it directly into a stablecoin so youâre ready to execute a trade whenever you feel like it.
This is much easier and safer than keeping your trading money in your bank in fiat.
What if a few days before you want to make a trade your bank decides it doesnât want you moving your money to crypto exchanges? Youâre stuck.
Having your money in a stablecoin is like having it in a bank. Except youâre completely in control of it. When a bank has your money, you never really own it.
Remember the capital controls Greece imposed during its crisis?
Remember the run on Northern Rock and the bank bailouts that followed in the UK?
Remember that Times headline written into the bitcoin genesis block?
Put your money in a stablecoin and no one can take it from you without the threat of force.
As you can see, stablecoins are extremely useful for exchanges and crypto traders. Until very recently the stablecoin of choice was Tether.
But if you follow the crypto news, youâll know Tether has had its fair share of tribulationsâŠ
Its owner and creator iFinex was recently sued by the New York Attorney General for fraud.
During this investigation iFinex admitted it doesnât actually hold a 1:1 ratio of US dollars in reserve for every Tether it creates â as it has always adamantly started.
It turns out it only holds around 74 cents for every dollar of Tether in existence. This happened, apparently, because it lost $850 million and had to dip into its reserves.
Then no sooner did this news surface than iFinex announced it had held a private crowd sale and raised $1 billion, sorting out all its financial woes.
Pretty convenient.
So, as you can imagine, most people donât hold too much stock in Tether, iFinex or the exchange it runs called Bitfinex.
New stablecoins have been minted by much more reputable sources over the last couple of years. And many of these new stablecoins make their auditing public to avoid being tarred with the Tether brush.
Now, Binance, the biggest crypto exchange in the world, is creating its own stablecoin. But unlike all the others, itâs pegging its stablecoin to the British pound.
From Yahoo! Finance:
Binance has announced that it is testing out a new GBP-backed stablecoin as a new asset on the firmâs native Binance Chain blockchain.
Despite being added as a new asset to be openly viewed on the firmâs blockchain, Binance CEO Changpeng âCZâ Zhao said that the new stablecoin is still very much in the testing phase, with âonly ÂŁ200 minted so farâ on the network.
This new GBP stablecoin also ties in with Binance recently opening up a new branch of its operation in Jersey. So it seems as though Binance is taking a shine to the UK.
When asked if Binance would be making a similar euro-backed stablecoin, its founder Changpeng Zhao gave the following answer.
From a British point of view, it could be pretty useful having a stablecoin pegged to our own currency⊠especially if it goes on to become one of the more used stablecoins.
And if it ends up being Binanceâs main stablecoin, which itâs looking like it may be, that could make the British pound a very important marker for crypto prices.
Now, if youâve read this far, itâs probably fair to say you have an interest in crypto.
If thatâs true, you need to get your name down for Sam Volkeringâs crypto event â Beyond Bitcoin â taking place at 2pm tomorrow.
In it, Sam will be covering:
- A simple way to understand where crypto prices will go next
- The most important lesson Sam Volkering learnt making 25,000% in the last crypto boom
- The single most valuable crypto trading secret you can use right now to strictly limit risk
- The two specific crypto plays beyond bitcoin and Ethereum that could deliver 1,000%+ potential gains
- A new way to accumulate regular crypto without mining⊠or buying it.
To take part, all you need to do is get your name down here today.
Until next time,
Harry Hamburg
Editor, Exponential Investor