Stablecoins: another cryptocurrency bubble?

According to a recent report from Blockchain, 57 new stablecoins are preparing to hit the market. Recently, stablecoins have been gaining more and more popularity, however, criticism towards them is also growing. There is also a belief that they may turn out to be a new bubble.

As of September 2018, there are three fully legalized, institutionally backed stablecoins: Gemini Dollar (GUSD), Paxos (PAX) and USDC, issued by Circle, which was admitted to listing on the Poloniex exchange on September 27.

The biggest problem with fiat-backed, legalized stablecoins is that they comply with the requirements of the banking sector. And this completely eliminates the potential for unlimited transfer of value. Holders of fully legalized stablecoins are subject to account size and transaction volume restrictions, as well as identity verification requirements.

However, an increasing number of stablecoins and tokens with weaker or hidden backing are emerging, such as the Cement coin, which was announced to launch on September 26th. A Vault coin is also expected to emerge, which will be backed by both fiat and gold.

Of the existing stablecoins that are causing concern, we can highlight the BitUSD coin, the actual price of which was at odds with its stated fixed price. Nubits coin (USNBT) is the most prominent example of a failed stablecoin that never regained its peg after the last decline where the price hovered around $0.11. As a result, investors abandoned USNBT in favor of Bitcoin. The team did not have the assets to support the price, and the USNBT coin permanently lost investor confidence.

Kowala coin founder Yelland Glover explained the collapse of the USNBT coin this way:

“The first generation of stablecoins supported the price level through minor coins or “shares” that promised interest. These coins/shares were then used to buy back stablecoins, temporarily removing them from circulation. However, when faith in fixed-value coins wavered, as in the case of USNBT, such a system became unprofitable.” If a shareholder received rewards in the form of stable coins that quickly lost value, he would lose the desire to voluntarily buy such coins/shares.”.

While stablecoins can be important for trading and moving funds in the crypto space, each new coin will need to prove its stability based on the chosen method as such startups try to take on the role of a central bank.

According to https://cryptovest.com/news/