Cryptocurrencies yet to recover from last week’s crash

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Bitcoin and other top crypto tokens, which are yet to completely recover from the crash last week, continue to see fluctuating price movements. Last week, the prices across tokens dropped around 15-20 per cent overnight amid panic sale by investors.

As of Monday 2:10 pm, Bitcoin was trading in green up by 3.36 per cent at ₹43.69 lakh, still down from last week’s peak of ₹47.58 lakh as seen on WazirX. Tether’s price dropped by 1.83 per cent, Sandbox gained 15.67 per cent, Shiba Inu was gained 1.63 per cent, Ethereum gained 5.02 per cent and Dogecoin was trading up by 1.72 per cent. All of them are far from last week’s peak rates.

On Monday afternoon, responding to a query in the ongoing Winter parliamentary session, Finance Minister Nirmala Sitharaman reiterated the Ministry’s stand on regulating Bitcoin, saying that the government has no proposal to recognise Bitcoin as a currency and it has not been collecting any data on any such transactions.

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What are stablecoins, and how stable are they?, BFSI News, ET BFSI

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By Manpreet Kaur

Stablecoin, a type of cryptocurrency, attempts to offer the best of both worlds – privacy of payments in cryptocurrencies and stable valuations of fiat currencies.

Tether, the first and the most popular stablecoin pegged against the US dollar, is pegged at $1 today, with a market cap of $68.7 billion.

What do stablecoins offer?

The coin aims to offer price stability, and is backed by a reserve asset – like the US dollar and gold.

Stablecoins, such as Tether that are backed by the dollar, remove transaction costs and delays that impair trade execution within the market.

It achieves price stability through collateralization or algorithmic mechanisms of buying and selling the reference asset or its derivatives.

Relatively, stablecoins are among the safer crypto assets to invest in. For instance, when $600 million was stolen from PolyNetwork last month, Tether simply froze the $33 million of its tokens that were included in the heist, which turned out to be useless to the attacker.

Stablecoins attempt to be highly liquid and tradable, making them easy to exchange into other cryptocurrencies or fiat currencies if desired.

It can help the investor manage volatility in a cryptocurrency market.

Given that they’re a stable currency, stablecoins provide an easy payment flow, which businesses can use to securely send money to their employees .

What are stablecoins, and how stable are they?

Are stablecoins volatile?

Though stablecoins are relatively less volatile than other cryptos, the coin remains to function like any other asset class – meaning it is not 100% risk averse.

Stablecoins are only as stable as their underlying asset. For instance, for stablecoins pegged 1:1 against the dollar, its solvency relies upon the strength of its reserves, which only include 3.87% of cash.

Risks of volatility in a coin’s trading volume and general market volatility remain in stablecoins, just as how it is present in other crypto assets.

Another aspect where the volatility can kick in, is if the stablecoin is centralised or decentralised. A centralised stablecoin, such as Tether, is held by an entity or exchange, while a decentralised stablecoin is hosted on a public programmable blockchain like Ethereum.

In decentralised stablecoins, large amounts of decentralised collateral such as Ether is infused to stabilise dollars, and blockchains like Ethereum can’t be controlled by an external actor.

One of the risks with stablecoins that have a central authority is trusting a third party to maintain their supply of dollars equal to the supply of stablecoins, which can be seen as going against the concept of decentralisation.

According to research firm Santiment’s data, Tether’s price remained largely stable but not all the time.

In November 2017, Tether was allegedly hacked with $31 million worth of coins stolen, and in January 2018, it hit another hurdle as the necessary audit to ensure that the real-world reserve is maintained never took place. This made the price fluctuate from $1 to $0.86 in 2018. These two incidents were among the major ones that pulled the price of Tether below $1.

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Meme-based cryptocurrency Dogecoin soars 40% to all-time high, BFSI News, ET BFSI

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LONDON: Meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

Dogecoin, launched as a satirical critique of 2013’s cryptocurrency frenzy, has climbed 41% in the last 24 hours to a record $0.68, according to CoinMarketCap.

This year alone it has soared over 14,000%, from $0.00468 on Dec. 31, taking it past more widely used cryptocurrencies such as the Tether stablecoin and XRP to become the fourth-largest by market capitalisation.

Dogecoin – whose logo features a Shiba Inu dog at the centre of the meme – remains little used in commerce or payments. Like other digital coins, it is highly volatile and its price is heavily influenced by social media users.

On Tuesday, the New York crypto exchange Gemini said it would start letting users trade and custody the token.

Some cryptocurrency market players said its volatility was its main draw, with a mixture of retail investors and market makers fuelling its trading volumes.

“The ugly truth is that a lot of crypto valuations are divorced from reality anyway,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities.

“Right now, (Dogecoin) is being seen as it’s always been seen – an asset with surprising staying power that provides opportunities to take advantage of volatility every year or so.”

Dogecoins are now cumulatively worth $88 billion, compared to bitcoin‘s $1 trillion and ethereum’s $391 billion.



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