Do We Need Stablecoins in the Cryptocurrency Market?

03/09/2023 04:30 • AI & Tech Insights • 67 views

According to the news on March 9, Arthur Hayes, founder of BitMEX, wrote an article to express his views on the stable currency of the encryption industry. In the article, he believed that there was no need for the super-mortgage stable currency such as MakerDAO and the algorithmic stable currency such as TerraUSD. The former was inefficient, while the latter was risky. The real reason why the market tended to store stable currency was that traders were allowed to trade between legal tender and cryptocurrency, so whether the stable currency was centralized or not was not important.

Arthur Hayes, founder of BitMEX, said that a centralized Bitcoin based stable currency NUSD should be created

Analysis based on this information:

Arthur Hayes, the founder of BitMEX, recently shared his thoughts on the relevance of stablecoins in the cryptocurrency market in his article. Hayes expressed his concerns surrounding the need for super-mortgage and algorithmic stablecoins such as MakerDAO and TerraUSD, respectively. According to him, the former is inefficient, while the latter is risky.

Stablecoin is a type of cryptocurrency that is pegged to a stable asset like the US dollar. They are an essential digital currency in the cryptocurrency market because they allow traders to avoid the volatility associated with other cryptocurrencies. Hayes’s opinion differs from the mainstream view, which supports the upward trend of stablecoins.

Hayes’ main argument is that the market’s demand for stablecoins was not because of their decentralization or algorithms. Instead, it was due to the traders’ need to exchange cryptocurrencies with fiat currency. The mode of exchange, whether the stablecoin is centralized or decentralized, wasn’t important.

He emphasized that the need for stablecoins would be eliminated if the cryptocurrency-to-fiat exchange was established without limitations. If the fiat currency could be directly used for cryptocurrency transactions, there would be no need for stablecoins.

Hayes believes that the existing stablecoin systems, such as MakerDAO, could not replace fiat currencies but instead were more like short-term loans for crypto traders. He noted that the current stablecoin systems did not make any significant impact in the mainstream financial sector.

Furthermore, Hayes claimed that algorithmic stablecoins, like TerraUSD, that do not rely on collateralization or external funds were too risky, primarily if they were not tried and tested over a more extended period. Therefore, Hayes does not support the use of algo stablecoins because they could be very unpredictable, leading to market instability and losses for traders.

Overall, Hayes’ call for reducing the importance of stablecoins may come off as heretic in the face of the popular opinion. However, his perspective could help other industry players think about the critical role and efficiency of stablecoins. It is pertinent to establish an efficient cryptocurrency-to-fiat exchange, which would eliminate the need for stablecoins to facilitate trades between currencies.

In summary, we can draw the conclusion that there is an ongoing debate on the relevance and efficiency of stablecoins in the cryptocurrency market. Hayes believes that there is no need for their existence, as the demand for stablecoins is based primarily on the need for crypto-to-fiat exchange, not their decentralization or algorithms. Therefore, Hayes calls for more efficient exchange platforms and less reliance on unstable stablecoins.

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Do We Need Stablecoins in the Cryptocurrency Market?

Arthur Hayes, founder of BitMEX, said that a centralized Bitcoin based stable currency NUSD should be created

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