To Fix Volatility, We Need Economy, Not Stablecoins
Volatility in the crypto space is mostly due to high diverse price action of tokens or coins. Cryptocurrencies are changing value too quickly without any significant changes in the underlying technology to warrant it. Often, our emotions are dictating the fluctuations. We go through a bear market when news is bad, and it only changes to a bull market when we see optimism in market sentiment.
The crypto space is attracting inexperienced investors motivated by news and hype. Unfortunately, this makes it easy for experienced traders to take advantage of them, as they understand market cycles.
After all, we have to accept that the crypto market is currently based on speculation, not on technology and its adoption.
No one can say how much Bitcoin is worth without looking at its rate on an exchange. And that’s the problem. To understand the value of a currency, we need to look at the commodities we can buy for it, not how much it is traded for.
Recently, many new stablecoins with different mechanisms have appeared. But they are not fixing the problem; they are just patching the broken system. We have to understand that we are not inventing the wheel just because we are creating a new industry. We should not forget about the past, but learn from it.
High volatility was known in many young or unstable countries. Their solution was not implementation of stable coins, but to improve the health of their economy through multiple avenues: increasing trading with other countries, reducing a trade deficit, adding new jobs, attracting foreign investors, improving GDP etc. Of course there were a few countries that cut the corners and adopted the U.S. dollar, for example, which we could compare to accepting stablecoin. However, these end up being small economies with GDP below Bitcoin market cap. Therefore, we can rule this out as a long-term solution.
There is no shortcut in decreasing volatility and we have to look at the crypto economy as a whole. Start thinking about creating jobs, products, and services in the crypto space that are paid in cryptocurrencies, reducing trade deficit with fiat economies, so people are not forced to use exchanges at all. Exchanges are the weakest point of the whole crypto ecosystem; they’re too easy to attack or regulate by financial institutions or governments.
Cryptocurrencies need to represent wealth in a decentralized economy and value that owners can use in order to satisfy their needs. It needs to represent independence from traditional systems. Only then we can start thinking about market stability.
Stablecoins therefore cannot be considered as a solution. An xDAC Platform with creation of governance for profit-driven decentralized companies will be the most logical way to bring this economy into the crypto space. We need businesses producing outputs that others can buy and jobs that are paid in cryptocurrencies. Then people don’t need to look at exchange rates at all. How many of us follow exchange rates of foreign currencies every day?
This will not be an easy task. Adoption will take time. People need to see cryptocurrencies as safe and reliable instrument. xDAC is building governance and a system that will protect customers and companies from fraud and illegal activities. Stablecoins cannot do this. They definitely cannot be considered as long-term viable option to fix market volatility.
