What are stablecoins?

I, for one, am okay with Christmas decorations before Thanksgiving. I love seeing Christmas lights at night. It makes the 5PM sunsets easier to handle. If you think it “steals from Thanksgiving” that’s a ‘you’ problem. I can be thankful and excited for Christmas at the same time.

A stablecoin is a cryptocurrency tied to a real asset (usually the US Dollar). While Bitcoin swings 10% in a day with the vibes, stablecoins are far less volatile.

Quick refresher: the blockchain is a distributed network of thousands of computers that verify transactions through encryption. Cryptocurrencies and NFTs rely on the blockchain concept. It removes the middleman and, most importantly for crypto enthusiasts, removes government control.

Stablecoins are crypto with something “real” behind. You get instant transfers, borderless payments, and programmable money without the "I just lost 30% because Elon tweeted" problem.

The difference from cash in your bank account? Stablecoins move 24/7, settle instantly, and don't need banks. Want to send $10,000 to Japan at 2 AM on Sunday? Your bank says no. Stablecoins say yes.

When Did They Become a Thing?

Tether launched in 2014 (originally as "Realcoin" before someone fixed that mistake) as the first USD denominated coin. Crypto traders needed a way to park money between trades without converting to actual dollars and dealing with banks.

Stablecoins exploded during the 2020-2021 crypto boom. Today, dollar denominated coins are the foundation of the crypto economy with way higher daily transaction volume compared to Bitcoin.

Stablecoins are a viable, practical use of cryptocurrency and the blockchain. Unlike $60 million dollar NFTs and widely volatile memecoins, stablecoins actually solve real problems by making dollar transactions faster and cheaper globally.

Who Controls Them?

Two companies dominate the stablecoin market:

Tether (USDT) - $140 billion in circulation. They claim to hold reserves of cash and Treasury bills but has settled with regulators for misrepresenting reserves. They've paid millions in fines. Trust accordingly.

Circle (USDC) - $50 billion in circulation. They are far more transparent than Tether. Publishes monthly attestations showing reserves of actual cash and short-term Treasuries in segregated accounts.

Binance (BUSD) and others make up the rest.

Here's the irony: these "decentralized" currencies are completely dependent on traditional finance. Every issuer holds massive cash in banks and buys U.S. Treasury bonds. Tether is now the 17th largest holder of short-term U.S. debt, more than South Korea and Germany. They rely completely on the security of the US Government guaranteeing the value of the assets they hold while skirting the burdensome regulation that bogs down big banks. 

Stablecoins Killed the Crypto Dream

Stablecoins exist under the very blanket of the freedom that the dollar provides but questions the manner in which it provides it. The dollar would surely prefer you just say thank you and keep buying yankee candles. Stablecoins need the USD on that wall, they want it on that wall. 

The entire promise was that crypto would replace fiat money. Bitcoin was a currency free from government manipulation. Then stablecoins said, "Actually, everyone just wants dollars and stability." A truth hardcore enthusiasts can’t handle. 

Anytime someone points to a Bitcoin chart above $100,000 and thinks it proves that Bitcoin “is real and going to replace the dollar” doesn’t understand they are proving the exact opposite. 

Why? Volatility kills currency. No one buys $5 coffee with Bitcoin when it might be worth $8 tomorrow or $3 next week. Merchants won't accept payment in something that could lose 20% overnight.

The crypto world created a backup plan and destroyed the fantasy. You can't have a backup. Either dive in headfirst and treat Bitcoin as true currency, or create dollar-backed crypto and admit what people really want is the stability provided by the dollar without a bank.

The Bottom Line

Stablecoins are digital dollars that move at internet speed with better security, fewer regulations, and more freedom. They're useful, practical, and increasingly secure, but they are still entirely dependent on government currency.

Bitcoin and Ethereum will forever be plagued with volatility and seen as an “investment” not a currency.

I believe there is a strong future for cryptocurrencies backed by assets like gold or dollars. The blockchain is a powerful technology, and we’ve just scraped the surface of what it can do.

Debrief on Deck

Next week is Thanksgiving! I hope you are able to enjoy the day with family, friends, and loved ones. I am thankful for you.

As always, please reach out to us with any questions or comments you have by replying directly to this email.

Until then, stay the course.

Disclaimer