2018 hasn’t been the rollercoaster ride that cryptocurrency enthusiasts have become accustomed to over the past year. While the previous year saw a prevailing bullish trend, the opposite holds true this year so far. Does this mean that cryptocurrency is a bubble just like how skeptics warned about all along? If you consider the fact that more institutional money is entering the market, then you would know that cryptocurrencies are stronger than ever despite falling prices.
Many cryptocurrency investors have been waiting for money managers to start adding digital assets to their portfolio. They argue that even if just 1% of the money invested in traditional assets such as stocks, bonds, and securities is transferred to cryptocurrencies, the values of various tokens will immeasurably increase. It appears that the first steps are now being taken by institutional investors as they start to seriously consider putting their money into cryptocurrencies.
One of the reasons why money managers have become more interested in digital assets is because of the rise in popularity of fiat–backed cryptocurrencies. These are a type of cryptocurrency whose value is pegged to the dollar as opposed to other stable coins which are pegged to other traditional assets such as real estate and gold. With the promise of lower volatility, these cryptocurrencies have started to gain momentum as evidenced by the increase in trade volume in trading platforms such as Bitcoin Trader.
The real question is: what makes fiat-backed currencies so special? If you’ve been trading crypto for a while now, then you know that exchanges can cost you a lot of money on fees alone. Converting your digital assets into fiat can hurt your overall investment portfolio without you even realizing it. The primary reason why you would want to have a digital coin pegged to a fiat currency is to avoid hefty transaction fees and taxes as well.
Moreover, Fiat faces challenges in terms of scalability and speed of transaction. Both of these problems are addressed in the cryptocurrency space with the introduction of stable coins. Their relatively stable prices enable investors to have peace of mind knowing that their coins will hold a steady value despite unstable market conditions.
Most cryptocurrency fund managers also explain that an audited stable coin is an epitome of what a stable coin should be. An increasing number of investors and developers agree that the most successful cryptocurrencies in the future will all be regulated and securitized. According to them, this is the only way for a cryptocurrency portfolio to become a common alternative investment strategy for those already invested in other traditional markets.
Fiat-backed cryptocurrencies have shown an immense potential in of their relatively short time in the market. More projects are being launched with the primary goal of introducing stable coins backed by the euro, Hong Kong dollar, and other fiat money. Institutional investors stand to benefit the most from these cryptocurrencies as they can enjoy higher security while saving the most money by avoiding costly fees, particularly when moving large amounts of cryptocurrencies into fiat.