Cryptocurrency, Tether (USDT), Stablecoins–Stablecoins, the growing classification of cryptocurrency which peg their wealth to an external source, have found a new supporter in the form of billionaire investor and Bitcoin bull Mike Novogratz.
Speaking at a conference in Frankfurt on Oct. 17, the Galaxy Digital Holdings Ltd. founder expanded upon his position for stablecoins, claiming that the technology may prove to be more beneficial for digital based transactions as opposed to traditional cryptocurrencies,
“The concept of stable coins make sense.”
Compared to Bitcoin, which has drawn a massive amount of criticism for its day to day price volatility–a black eye for most of the industry in terms of being an attractive source of payment for the mainstream–stable coins are, inherently, stable. Some have decided upon a particular government currency to peg their traded value at, with the idea being that fiat exhibits less price volatility in the short term.
However, despite being positive on the general outlook for stable coins and their potential on the crypto transactionary landscape, Novogratz found fault with the world’s largest stable coin and eighth largest cryptocurrency by market capitalization, Tether USDT. While Tether has managed to generate price stability relative to the market by pegging its value to that of a single U.S. dollar, the currency has also drawn massive amounts of controversy in the form of its monumental coin issues and the legitimacy of its dollar-backing. Tether has printed $2.13 billion worth of USDT to date, presumably all backed one to one with American dollars. However, a number of investigations into the backing of the currency, despite failing to discover any foul play, have yet to assuage the concerns of the crypto investing landscape.
Novogratz stated that he believed Tether was responsible for the negative press generated around the coin, by failing to institute a policy of transparency early on which has continually hurt the currency’s brand perception. Bloomberg cites the falling price of USDT away from its historic $1 mark–which the coin is supposed to be pegged at in terms of value–as a strong indication that investors are losing confidence in the coin for a variety of reasons, the most prominent being concern over the actual amount backing the coin’s billion dollar market cap.
In addition to his criticism of Tether, Novogratz finds fault in how the company handled inquiries into the coin’s pegged valuation,
“I think Tether didn’t do a great job in terms of creating transparency,”
According to Novogratz, rather than printing millions of dollars worth of new USDT, the company Tether should be concerned with improving their perception to the general cryptocurrency investment base. Until concerns surrounding the validity of the USDT token, in addition to the numerous accusations of controversy surrounding the relationship between the coin and exchange Bitfinex subside, the coin may continue to slide away from its pegged value of $1–a monumental feat given the coin’s proposed one to one backing. In the meantime, as Tether continues to generate controversy and negative press, a number of new stablecoins are coming to the market to fill the need for price-stable cryptos.