March 13, 2021 | 5:00 am
By Andy Hecht
If we asked Warren Buffett or his partner Charlie Munger what they think of the recent correction in the and the other digital currencies, they would say that the asset class is the equivalent of a modern tulip mania or tulip crisis. While both investors are now in their 90s and consistent in their views on the world of cryptocurrencies, others once critical have been very quiet recently or have surrendered to quiet acceptance.
Apart from bitcoin, there are more than 8,600 other cryptocurrencies in circulation. The first 12 have market capitalizations of more than $ 8.5 billion. Two of these first 12 are the tether and the USD Coin.
Both are known as stablecoins or “stablecoins”, that is, cryptocurrencies that track the world’s main reserve currency, the US dollar. That connection makes them both much less volatile than their crypto counterparts. However, they do not include traditional US dollar flows in the money supply or in the US Treasury’s control.
Digital assets: gravity is a powerful force
After posting highs of $ 58,610 on the upcoming futures contract on February 22, bitcoin fell below the $ 50,000 level, but returned to near highs on Wednesday, March 10.
The daily chart highlights the correction from recent record highs and recovery to above the $ 56,000 level. The digital currency looks poised to challenge the $ 60,000 per coin level.
The is the other digital currency that operates in the field of futures.
The chart of the newly minted ether futures shows that excitement over its listing in early February pushed the price to highs of $ 2,012 per coin on February 19. On March 10, the price was back below the $ 1,800 level after recovering from around $ 1,400 at the end of February.
The United States and Europe are not crypto-friendly
It is impossible to peak in parabolic markets as they tend to reach levels that defy logic, reason, and rational fundamental analysis. Meanwhile, cryptocurrencies are a disruptive technology. Furthermore, they are a direct challenge to government control of the world money supply.
The old saying, “if you can’t beat them, join them” could be the result. China is already hard at work on its version of a cryptocurrency. The United States and Europe are likely developing digital dollars and euros to stay in the game for years to come.
The blockchain has already been widely accepted. Cryptocurrencies are as follows. However, those who survive will have to walk the fine line of the many vested interests of the global economy.
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Is tether really backed by US dollars?
Tether was originally called realcoin in 2014. Unlike bitcoin and many other cryptocurrencies, a company owns, mints and manages the supply of tether, limiting transparency.
The tether is the fourth digital currency by market capitalization, only surpassed by the bitcoin, the ethereum and the binance coin.
As of March 12, the market capitalization of tether was $ 34.2 billion, or about 2% of the value of the entire asset class.
The chart shows that while the US dollar does not support the tether, it is trading around a dollar per currency.
Digitizing the dollar with the USD Coin
Meanwhile, the USD Coin is pegged to the US dollar and runs on the Ethereum blockchain. Each USD Coin is backed by a dollar held in reserve. The USD Coin was launched in September 2018.
The USD coin is the twelfth cryptocurrency by market capitalization as of March 12.
Its market capitalization amounts to $ 9.13 billion, which represents about 0.5% of the entire asset class.
The USD coin has also traded around the $ 1 per coin level since it started trading at the end of 2018.
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