Regulators are increasingly thinking about the security of their financial system recently and cryptocurrencies, along with stablecoins, play an important role in this. But if everything is quite complicated with bitcoin and all that the regulatory authorities can do is just to ban its circulation, then everything seems different with stablecoins. It is this digital asset that creates a real storm for the financial system.
Stablecoin is a form of digital cryptocurrency with a fixed price, usually completely pegged to one dollar or other currencies in which they are issued. At the end of May this year, the total market capitalization of stablecoins, including those offered by cryptocurrency firms Tether and Center, exceeded $100 billion. Such a circulation of, in fact, uncontrolled money clearly causes excitement. And even if it's not even about the financial system, but from the point of view of investors and people who are engaged in cryptocurrency trading. After all, these are the first consumers who actively use bitcoin, ether, and so on to exchange for stablecoin and vice versa, as it is very convenient.
In recent weeks, lawmakers and Federal Reserve officials have repeatedly expressed concern that some consumers will not be effectively protected if one of the firms issuing stablecoins suddenly begins to have problems. They are also worried that the growing size of stablecoins creates a situation where a huge number of coins equivalent to the US dollar are exchanged without affecting the U.S. banking system, which creates a good ground for financing criminal schemes. "They are dangerous both for users and for the financial system as a whole," said Lev Menand, a research fellow at Columbia Law School, speaking before the Senate Banking Committee last week.
Many consumers in the United States do not understand that the money stored in stablecoins is not protected by the Federal Deposit Insurance Corporation (FDIC) and that in some cases they can simply lose their money if there are any problems in the company. Democratic Senator Elizabeth Warren of Massachusetts compared stablecoins to "wildcat notes" issued by low-cap banks in the 19th century, which later inflicted heavy losses on many of their holders.
The United States is considering the possibility of launching its own digital currencies, so it seems that another market shock is waiting for us in the near future when the regulatory authorities will come to check the companies that produce stablecoins. In fact, only stablecoin is the main competitor to the digital dollar, which many are expecting soon. It is expected that this year the Federal Reserve Bank of Boston will publish research and open source code that can become the basis of the digital dollar. However, Fed Chairman Jerome Powell recently said that the process of implementing a new digital technology can take years.
As I noted above, as cryptocurrency trading grew, so did the use of stablecoins. Any spike in bitcoin led to the release of additional millions of USDT and USDC to provide liquidity. Investors mostly use stablecoins as a place to store money on cryptocurrency exchanges without having to transfer it to their bank accounts. The largest company with a market capitalization of $62.6 billion is Tether, registered in Hong Kong. US Dollar Coin, or USDC, has a market capitalization of $23.8 billion and was created by cryptocurrency payments firm Circle Internet Financial Inc. and US cryptocurrency exchange Coinbase Global Inc.
Last year, there have already been checks that have revealed that the company Tether International Ltd. does not have enough funds to secure a 1:1 dollar peg. After that, the New York attorney general banned the use of Tether by New Yorkers. The company now claims that the Tether coin is backed not only by cash, but also by assets, including commercial paper, corporate bonds, and precious metals. The USDC also claims that every coin they print is backed by a dollar in a bank account.
How this story will end is unclear, but the fact that nothing good is waiting for these companies remains a fact.
As for the technical picture of bitcoin, the tests of the 41,100 mark do not stop. Just above this level, the 200-day moving average passes, which can create a lot of problems for buyers. Therefore, only a break in this range with the subsequent exit of the pair beyond $41,100 will open a direct path for the world's first cryptocurrency to the area of $46,700 and $52,000. However, such a sharp jump can only be expected after a real consolidation above $41,100. If an active growth above this range does not occur immediately, this may lead to a repeated return of the pair below this level and to another decline in the area of the middle of the side channel ($36,300). There, it will also be necessary to carefully assess the activity of buyers, since an attempt may be made from this level to build a new upward trend in the future.
As for the technical picture of ether, everything is also calm. The volatility from the low of $1,748 to the large resistance of $2,900 is gradually decreasing. The middle of the channel and, accordingly, the support is a large level of $2,260, which the bears have repeatedly fought, but it is not yet possible to overcome it. If there is a breakdown, I think we will see an instant decline in the ether to the support area of $1,748. In the meantime, the bulls are aiming for a break of the $2,900 resistance, which will open a direct road to a high of $3,558.
