How to protect against losses in the stock market? Gentlemen prefer stability
How to protect against losses in the stock market? Gentlemen prefer stability
High volatility is characteristic of most cryptocurrencies, which significantly complicates their use as a means of accumulating, sharing, or calculations. To solve this problem try the issuers tablconv — cryptocurrency whose value is tied to real assets: Vietnam currencies, commodities, gold.
The rate of such tokens in fiatnym money in theory is not reduced even when the whole cryptocurrency market is experiencing a period of decline. But, on the other hand, their rate is not growing, when all the other digital currencies are on the rise, so speculative investors treat stabilium cool.
That, however, does not prevent them to be the main buyers of such tokens. The fact that the vast majority of cryptomelane implement the strategy of “trading against the dollar”, that is trying to increase his fortune, calculated in Fiat currency. When such strategies are essential protective assets for fixation positions. The ideal tool for this stabilini be, for example, Tether, TrueUSD, ROCKZ.
Stabilini — for whom?
Among typical users tablconv are the long-term cryptocurrency investors. In fact, it is capturadora who carry out transactions in less than speculators, or work in several markets at the same time. For them the critical ability to securely lock the profit and safely ride out periods of extreme volatility or quickly transfer funds to another site or to another scriptactive. Stabilini perfectly solve these problems.
Another category of users is stable cryptocurrency clients cross-border transfers. They needed a reliable tool for cheap and fast money transfer to other countries. In other words, the cryptocurrency, which is easy and stable rate of exchange to Fiat currency anywhere in the world.
Because stabilini actually are the digital counterparts of real values, the main requirement, which they present users is reliability. First and foremost, it is the complete provision of the whole volume of issued tokens reserves of the underlying asset. Therefore, the stable token issuers should have reputable auditors who on a regular basis confirm the existence of such assets.
On the flip side of having to constantly confirm the availability of reserves is tablconv exposure to speculative attacks based on rumor. In addition, to ensure the smooth conversion of cryptocurrencies in real assets have to comply with numerous regulatory requirements, which complicates the process of issuing and use tablconv.
Two tokens, to avoid problems with the SEC
First stabilini appeared before the Commission on securities and exchange Commission (SEC) equated such tokens to securities. New projects were in more severe conditions, because now under the regulation of the SEC not only get a service token corresponding to the two requirements.
The first is by the release of the token product is supposed to be run, and the coin be used for other purposes. The majority of the ICO projects not cope for lack of a usable version of the product. So token for at least several months may not have practical application. And this is only the first hurdle.
Second — tokens should be purchased only by users of the platform, not the investors of the project. Investments in the capital and the promise of profit, under current U.S. law, are sufficient conditions for recognition of a financial instrument is a security.
The Commission emphasizes:
Innovation made with the help of the blockchain transaction is not a sufficient reason for withdrawal of securities owners and investors from government regulation, because it is just designed to maintain the integrity of the market.
In the end, the SEC ruled that issuers “or distributed based on blockchain technology securities,” that is, tokens must register their accommodation as well as issuers of shares or bonds, “if there is no other legitimate reason.” Individuals involved in unregistered offerings, may be held liable for violation of legislation on securities.
Note that the penalties for such violations in the US are quite unpleasant — from huge fines that can amount to millions of dollars, to multi-year prison terms. Some analysts have even concluded that this decision of the SEC effectively banned American investors to buy any tokens. Because the standard procedure of registration of issue of securities requiring the preparation of a huge number of documents, ICO deprives of their main advantages — speed and ease crowdfunding process.
Realizing this, the vast majority of the organizers ICO today chooses the lesser of two evils and just write in the white paper ban on the purchase of tokens, citizens of the United States (and other jurisdictions). Some even block American IP when applications. It is clear that this cut off a large circle of investors, which affects the results of the ICO.
Moreover, such a prohibition greatly limits the possibility of an exit token in exchange. While the founders themselves could not guarantee the absence of abuse by American investors (for example, use proxy servers or VPN to buy tokens), exchanges and even refuse to work with similar tools, not to accidentally incur the wrath of the Commission on securities and stock exchanges.
In fact, it is possible to circumvent the restriction on the purchase tokens American investors without any violations of the laws of the United States. The fact that in September 2013, Barack Obama signed the Jumpstart Our Business Startups Act (JOBS Act), which largely simplified the process of investing. In accordance with this law companies, raise capital through sale of securities, may not register their issuance with the SEC, and to place the paper in private in accordance with the so-called “Rule 506” (Rule 506).
It allows issuers to attract an unlimited amount of capital from accredited investors — individuals with a personal income of more than $200,000 a year or assets worth more than $1 million (excluding value of primary residence). According to some estimates, now in the U.S. it covers about 8 million people so the potential for raising money is large enough.
So recently among the organizers of the ICO is gaining popularity as a model of two tokens. In the first phase, the company creates a token action, investment or token that is offered to accredited investors under the “Rules 506”. In the second phase, the company produces the service tokens that are not considered securities and are not regulated by the SEC, but may be used by holders at their discretion. Buyers also get a primary token from the organizers of the project have different privileges.
One of the most successful examples of implementation models of the two tokens could be a new project for the production stablon ROCKZ tied to the Swiss franc. In the first stage, the project organizers will release the token Alprockz (APZ), which will provide access to liquidity, will allow us to issue a credit card and to debt financing. The second stage will released the actual token ROCKZ, 100% backed by reserves of the Swiss franc. The holders Alprockz promised deliverance from fees for transaction and service platform.
It is noteworthy that earlier there was information about such a project from the commercial Bank of Liechtenstein, which is going to produce two tokens, one of which will be provided to the Swiss franc.
The most famous stabilini
On the market now there are three types tablconv. The first and the rare token without security. These coins are not backed by reserves of physical assets, and their fixed price is provided through smart contracts. As an example of such stablein you can give the project BitShares BitUSD tokens are traded against the US dollar since September 23, 2014. During this time its price was on average $profit of 1.0240.
Another example stablon without ensuring project NuBits launched in 2014 on the algorithm of “proof” lock with token USNBT tied to the U.S. dollar at a 1:1 ratio. Also issued coins NuShares (NSR), which are not traded on the stock exchange, but provide owners the right to vote.
The project shareholders elect custodians (guardians) of coins, and also vote for the creation of new tokens. To understand the intricacies of this system does not make sense, because it proved to be not too effective: the quotes are stable NuBits are now in the neighborhood of $0,15.
The second group tablconv — backed cryptocurrency. The most famous representative — nUSD with a stable price of one dollar, provided the unstable token HAV.
Stabilini, secured by real assets: the Most extensive group of stable cryptocurrency
It includes a token whose value is guaranteed by reserves of commodities, jewelry and Fiat currencies. In fact most of them are not very stable because of mutual quotations of the assets to which they are attached, are constantly changing. Although not as much as the cost of conventional cryptocurrency against the dollar.
As an example, stablon secured exchange commodities, can be called Digix Gold Token whose value is tied to gold. Auditors regularly verify the presence of gold, the security of these coins, and publish their reports on the Ethereum blockchain.
Although gold is kept centrally, the project is run in a decentralized manner in the network DAO. Token DigixDAO (DGD) provides a voice in the system Digix. Holders DGX pay a small amount to cover the costs of storing the gold. The value of this token is indeed quite stable: if in may it traded at $44, now $42.
Another token that is bound to the exchange the goods – Venezuelan Petro, secured oil reserves Ayacucho, which are estimated at 5 billion barrels of oil. The only problem is that the field has not yet developed, and when will its development is unknown. On the other hand, in Venezuela a lot of oil and without Ayacucho: according to OPEC, the country ranks first in world reserves of black gold that exceed 300 billion barrels.
However, in oil production, Venezuela is not even in the top ten world leaders and is only 11-th place, deflating from their bowels about 2.2 million barrels per day. Nevertheless this is quite enough to consider Petro secured cryptocurrency. However, the lack of coins on the major stock exchanges really raises questions about the sustainability of their prices. The more that oil prices exhibit high volatility.
Most popular stablename today are tokens pegged to Fiat currencies.
First of all, this Tether (USDT), the price of which is pegged to the us dollar at a ratio of 1:1, i.e. one USDT can be exchanged for one US dollar. The rapid increase in volume to two billion of these coins currently in circulation, shows how high the market demand for digital money with a stable value.
The Tether system based on the bitcoin blockchain and works on the algorithm Proof-of-Reserves. Theoretically, first, on account of the Tether Limited do dollars, then in accordance with the amount of real money is issue token USDT. Them through the crypto currency exchange sends to users who conduct transactions among themselves and exchange Tether for other cryptocurrencies. Real dollars at this time is stored in the special account of the company. If the owner of the token decides to cash out, for example, 100 USDT, company Tether would send him 100 real dollars and will hold burning 100 tokens. The corresponding amount of USDT network and real money in the Bank account Tether Limited is confirmed by periodic audit.
In practice, however, this scheme has serious problems. Limited because the Tether did not bother to conduct regular audits in the cryptocurrency community has a suspicion that the company does not have sufficient reserves to support USDT all in circulation.
In addition, in June Chinese cybersecurity experts from the company SlowMist studied code cryptocurrency project Tether freely available and found something new. This stablein the code has a vulnerability that allows an error of double spending. It turned out that, while the crypto currency exchange is processed reception means in USDT, they may mistakenly confirm the money transfer. Such operation will be successful, although, in fact, digital money is still not debited from the user’s account. In other words, if you try, in the case of Tether USDT can be credited to your account on the exchange, actually keeping the coins at home. However, the problem is almost no effect on the price of token is: 24 August USDT was quoted at $0,9986.
The second stable coin secured by dollar — TrueUSD. This project has been repeatedly criticized for bias in favor of the exchange Binance, which accounts for 88% of the total turnover TrueUSD. And yet these tokens show the same stability and Tether: August 24, 1 TrueUSD was worth exactly $1. The market capitalization of bitcoin has made $68.2 million, a decrease of nearly $22 million from July’s peak.
Recently stabilini tied to the dollar, began to cause more anxiety among investors due to increased volatility of the American currency in world markets. In particular, since mid-August, the dollar began to decline against the Euro, Japanese yen and other leading currencies due to trade wars, as well as new scandals surrounding the person of the President of the United States.
Worldwide intensified projects to develop new digital money, backed by real assets
One of the most promising project ROCKZ, stablein on the basis of the most stable world currencies — the Swiss franc. We can assume that soon we’ll see some new coins, provided that currency.
According to the estimates of economists, over the past 50 years the American dollar has lost 78% of its value against the Swiss franc. Apparently, in the coming years this figure will increase substantially. Now inflation in the U.S. dispersed by the increased oil prices and new import duties, caused the growth of prices for steel and aluminum in the United States.
The demand for the dollar in the world decreases. On the one hand, more and more countries led by China and Russia stated the need to abandon the U.S. currency in international payments. On the other — falling global demand for U.S. government bonds. All this creates conditions for at least the global dollar weakness.
The economic advantages of the Swiss franc compared to the us dollar and tied to it stablename complemented by a range of other bonuses. The Swiss government has announced its intention to make the country a world leader in the field of blockchain and cryptocurrency. The Swiss authorities have embarked on providing maximum support to companies involved with cryptocurrencies and bacchanal, can not be said about the United States.
ROCKZ and of itself has a number of advantages compared to USDT and other stablename. In particular, there are no restrictions on the exchange of cryptocurrency for Fiat money. The owners of this coin will be able to transfer the equivalent amount in Swiss francs to your Bank account, credit card or directly from a Swiss Bank. Reserves of francs, which are supported by the coin project, deposited in the vaults and banks in Switzerland. Their presence and amount is regularly confirmed by authoritative audit without any additional requirements on the part of the holders of the cryptocurrency. All market participants have full unhindered access to the estimates of auditors.
Thus, a stable currency allow all players the cryptocurrency market to fix the position and be able to quickly go into the cache, to be confident in the reliability of the Issuer and the security of cryptocurrency with Fiat.
About the author
Sergei Magas, blockchain journalist. I bought the first cryptocurrency in 2014.