If you ask an executive of an institution three reasons why his or her institution hasn’t invested in cryptocurrencies yet, at least one of the reasons would be high price volatility. It is this price volatility that took the price of Bitcoin all the way above $19,000 and it is the price volatility that dragged it down to less than $3200 within less than a year. Price volatility can bring in significant rewards but it can also cause significant losses. This is why many institutional investors are not ready to invest.
Stablecoins Present A Solution To the Problem
One way the industry has tried to solve the problem of volatility is with the creation of stablecoins. These stablecoins are pegged with more concrete assets like the USD, gold and even oil. Tying cryptocurrencies with real-world assets make it safer for investors who are afraid of the price volatility in the industry to dive in. Enterprises benefit the most from these stablecoins. This is why JPMorgan Chase decided to develop a stable Coin based on the Ethereum blockchain. The JPMorgan enterprise cited inefficiencies of the traditional financial system for payment settlements as their reason for looking to blockchain technology.
Another company, the largest palladium producer in the world, Nornickel (Norilsk Nickel) announced that it would be creating a blockchain-based stablecoin that would be pegged to precious metals soon. The company admitted that stablecoins offers numerous benefits like price stability and other benefits to its mining business. Creating its own stablecoin is one step towards developing a digital economy.
Tether (USDT) Price Today – USDT / USD
The launch of the JPM stablecoin came months after the Venezuelan government launched Petro. Petro is a stablecoin that is pegged to the price of oil. The goal is to aid hyperinflation in the damaged economy.
Stablecoins Have Become A Must For Enterprises
Enterprises aren’t just focused on integrating blockchain technology because of its immutable and decentralized nature. They have developed an interest in the ability of stablecoins to boost their productivity and profit. As these stablecoins become more popular, many cryptocurrencies will be removed from circulation. Stablecoins are more appealing to regulators because they are not volatile.
The JPM Coin, for example, will function within a regulated space. It would leverage the emerging blockchain technology for cross-border payments among other things. The fact that this enterprise has decided to use stablecoins show that the big players in the financial sector are starting to realize the potential of blockchain technology across the market.
A blockchain-based stablecoin will offer increased protection, and flexibility against geopolitical problems by offering financial fluidity. With brands like JPMorgan, and Norilsk Nickel at the forefront, it’s only a matter of time until more companies join the stablecoin trend. Companies that don’t keep up with technological advancements always fall behind. This happened when the internet became popular. Many companies that didn’t find ways to give their businesses a global presence were left behind.
Blockchain technology will be the hallmark of the next technological revolution. It benefits extend beyond the financial sector alone. Companies that don’t find a way to get on board the blockchain train may be left behind.
Do you think value-pegged coins truly provide value to enterprises or is it all just a hype? Share your thoughts in the comment section.