In this inflation rate rising globally, stablecoins look quite promising as an alternative system. However, to remain stable in the market, it needs to be auditable. The name of stablecoins is not famous and the mere fact that these are given the status of the actual asset does not mean that they are stable.
Stablecoin’s New Solution Is Gold
Most of the coins are pegged to fiat and the fact that even traditional assets go through fluctuations in the market, they cannot be given the status that they are very stable. However, in case they build a stronger foundation, stablecoins can live up to their expectation.
The market during the pandemic has been volatile and with the inflation and debt level rising, the investors are profiting more from alternative sources of wealth. Thus there is no guarantee as prices are going up and down daily. The community of Crypto has moved towards stablecoins to be risk-free.
The verification of this trend has been done by HKMA which showed expansion in the market from 2020 in regard to capitalization of the market. PayPal has also recently declared that they will launch their own coins which will be supported by the United States dollar. This is problematic to stablecoins as it is always backed by fiat money which is not stable.
The Government has issued $17 million in new money which resulted in the rise of debt globally and devaluing the power to purchase currencies. As Government is issuing more fiat, stablecoins look more promising as they are supported by assets that are stable. The only option is gold whose price remained between $1,700 to $1,950 amidst the pandemic.
The asset that was underlying must be totally redeemable and allocated like for one token, one gram of gold. This not only prevents the coin to support growth in debt but also reduces its distance from asset reality.