Forbes: don't invest your money in stablecoins

12 Sep, 2018
by Arthur Sillers
Forbes: don't invest your money in stablecoins

Stablecoins have been in the news this week and are becoming a popular way to hedge risky crypto bets. While innovative, there are good arguments for why investing in them is a bad strategy.

Stablecoins are a category of cryptocoin distinguished by the fact that they are pegged to a traditional currency, in most cases the value of the USD.

With Paxos just recently releasing a new stable coin the same day as the Winkelvoss twins launched their own Gemini stablecoin, this particular type of token is sure to be a visible part of the crypto landscape for the foreseeable future.

In response to these developments, Simon Moore, writing for Forbes argues that stablecoins are in fact a bad investment, though technologically interesting.

In his analysis, stablecoins remove the risk inherent with cryptocurrencies, but in exchange they also lose the high ROI that anyone who invested in crypto early has already come to experience. Moore notes that many are drawn to stablecoins because they are tied to a relatively stable value, but Moore notes that because crypto is so volatile, it isn’t particularly noteworthy to be more stable than an investment like Bitcoin. In addition, by removing the instability from the equation, stablecoins miss out on potentially huge gains when markets soar.

The main point he makes is that stablecoins are inherently bad investments because the USD is a historically poor investment choice. Moore describes the fact that the USD tends towards inflation as the United States prints more money to pay back debts. This in fact, is one of the reasons that cryptocurrencies were created- to disallow a centralized power from printing more and devaluing the currency.

Moore concedes that stablecoins, given their more robust value and the fact that they are tied to already well used currencies, do offer a psychological advantage. They act as both a bridge for transferring capital from traditional financial currency to crypto, and they could prove a more usable digital currency that cryptocoins which experience huge upswings and falls.

For the crypto project to be realized fully as it was originally conceived, it needs to be used as a medium of exchange, and not an investment instrument which speculates on the wild swings of the market.


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