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Cryptocurrency Volatility: Enemy Or Friend? How Can Digital Assets Be Price-Secure
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Volatility. Depending on where you find yourself in the cryptocurrency space, that word can mean a lot of joy or heartbreak. Some people find the volatility as vital to the growth and interest in cryptocurrencies, harking back to the wild days of late 2017.

Others, however, see it as the reason that cryptocurrencies have failed to fulfil vital roles and disrupt certain sectors - such as being a functional and viable digital currency. Volatility has long been the enemy of functionality but has also led to alternatives in stability being sought.

There is no getting away from the fact that Bitcoin, and all the cryptocurrencies that followed, were propelled by a wild state of volatility - mostly in an upward trajectory - through 2017.

The original cryptocurrency skyrocketed in value over a very few years to be worth of $20,000 offering many thousands of percent gains for those who invested early. The stories of early adopters and miners, who held a bucketload of Bitcoin when they were worth pennies reaching millionaire status certainly caught the imagination of the planet.

These stories permeated the mainstream, and suddenly everyone wanted to know what Bitcoin was, what blockchain was, and how they could be a part of this get-rich-quick scheme. That interest alone fuelled the price rise even further, and it became a snowball effect in the shape of a speculative bubble.

2019 is a very different space for the cryptocurrency market though. Speculative investing is over, and instead, people are looking for functionality and use cases for cryptocurrency. This has spawned the ‘stable coin’ movement which has spread to Wall Street and JP Morgan Chase.

However, there are many different ways that companies and cryptocurrencies are looking to remain stable to provide a functional and viable service, as well as to aid in their adoption as a token that can be of worthwhile and valuable.

The Pegged coin

One of the most prominent ways that people believe they have found to avoid volatility in the cryptocurrency market is to peg their digital assets to a commodity or currency. JP Morgan has become the latest to give this a go with their controversial JPM Coin which operates on a permissioned blockchain and has the value tied to the dollar.

Before that, there was Tether; equally controversial and equally pegged to the USD - for a while anyway as that pegging is no longer assured. By pegging their value to a stable currency, people now had a coin that had the attributes of a cryptocurrency - such as its borderless nature and decentralisation, but without the wild swings.

Essentially, a token like JP Morgan's would always be worth $1, and thus, if the adoption of this coin were to spread to the public, and reach mass proportions, digital payments would be far more accessible and efficient, without the fear of wild swings of traditional cryptocurrency.

There have also been attempts to peg the value of a cryptocurrency to assets, such as a barrel of oil, as in the Venezuelan government created Petro cryptocurrency. Even a major palladium and nickel mining company is looking to launch a stable coin pegged to the price of these precious metals.

From governments to Wall Street Banks, and even startups, many are looking to stable coins as the answer, but many are shrouded in controversy. But there is no doubting there is some potential to be seen in stable coins.

Major companies enter the water

In more recent times, there have been stirrings from companies of the magnitude of Facebook and Google who are looking into cryptocurrencies but in a way that their value is relatively stable. Even IBM, which has been quietly leading the way in terms of enterprise blockchain, they too have their answer to a stable crypto asset.

Facebook, the owners of messaging app Whatsapp, has been in the news with rumours circulating that there are plans to develop a stable crypto asset that will let users transfer money on the WhatsApp messaging app, focusing first on the remittances market in India.

Google also announced last year the second of two partnerships that will allow it to offer the financial services industry and others a cloud-based platform on which they can develop and run blockchain-based applications.

The search giant said it is partnering with Digital Asset and BlockApps to enable customers to explore ways they might use distributed ledger technology frameworks on Google's Cloud Platform.

IBM has also come up with a unique payment solution, called Blockchain World-Wire. The platform offers a system for cross-border payments without the involvement of any bank mediators. In this way, financial operations cost less to the general public, but a single exchange fee ensures the stability of the cryptocurrency involved.

IBM uses Stellar protocol Stronghold USD stablecoin as an intermediary currency, to enable financial offices to settle cross-border payments within seconds. The attractiveness of this system is its simplicity, transparency, single fee for different currencies, security and limitless possibilities regardless of the amount, asset type and currency destination.

Smart startups

While it is promising to see major companies, banks, and even governments trying to offer a stable and functional digital asset, it is also important to have innovation progressing from smaller startups in regards to functioning cryptocurrencies.

Gemini is one well-known startup, because of its founders, the Winklevoss twins, that has tried to push all levels of cryptocurrency from ETFs to exchanges, and have also launched their stable coin with a focus on regulation.

It is crucial for startups to try and push the boundaries, but equally so to remain within regulatory bounds as another startup - Basis - learnt the hard way as they were forced to shut down their stable coin project citing regulatory constraints.

Still, others, such as the SocialGood foundation INC, are a startup trying to innovate with stable values of digital assets. They have designed and submitted a tokenized cash-back patent, where customers can get cash back within the social good cashbook platform when they shop at major online retailers, as an example. With this, the company states that demand of tokens rise, with a limited supply and forced demand, keeping volatility down but potentially slowly raising the value instead of wild up and down movements.

A move towards currency

Bitcoin and other cryptocurrencies have been struggling to find their direction in their short time within the mainstream spotlight. There was a time where it would have been foolish to part with even the smallest fraction of a Bitcoin was foolish as its value would increase daily.

The time of the ‘digital gold’ however is pretty much over, and speculation and investment is only a minor part of the space. Instead, the need for functionality has necessitated a stabilizing of the asset.

There are many ways in which are being tried to secure stability, some are still being tested, and they need to prove to be viable. But, no doubt, volatility needs to be quashed going forward.


by Darryn Pollock
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