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Circle, The Company Behind The USDC Stablecoin, Announces Euro Coin

Does the world need Euro Coin? There are already stablecoins pegged to the Euro in the market. The difference here, however, is Circle. As the issuer of the well-regarded USDC, they have the reputation, the know-how, and the clientele to make this happen. Even with all of those advantages, it’s the market that will decide if the world needs Euro Coin.

Related Reading | Crypto Investors Find Safety In Stablecoins, Bitcoin, Ditch Altcoins En Masse

On the project’s page, they describe it as, “Euro Coin (EUROC) is issued by Circle under the same full-reserve model as USD Coin (USDC), a trusted dollar digital currency with more than $54 billion in circulation.” At first, Euro Coin will exist on the Ethereum blockchain, it’ll be a traditional ERC-20 already compatible with everything out there.

1/ CIRCLE LAUNCHES EURO COIN: Today, we announced our 2nd major fiat-backed stablecoin, Euro Coin, which went live on Ethereum mainnet, and will be available to mint and redeem on June 30th. https://t.co/vPZkItL0Fu

— Jeremy Allaire (@jerallaire) June 16, 2022

The Euro Coin will be “100% backed by euros held in euro-denominated banking accounts so that it’s always redeemable 1:1 for euros”. The difference with regular euros is that EUROC will be “available 24/7 and moves at internet speed”. The new stablecoin debuts on June 30th. “Businesses can mint Euro Coin straight from the source by depositing euros into their Circle Account using Silvergate’s Euro SEN network.”

What’s Euro Coin ’s Main Use?

In a recent tweet, Circle CEO Jeremy Allaire summarized the product’s value proposition. “Like USDC, Euro Coin is being issued under a regulated framework for money transmission, under the same statutes that regulate USDC, with full-reserves in Euro, with the same security, liquidity and transparency that the market has come to expect from Circle”. Does it solve a problem, though? Two words: foreign exchange.

4/ Euro Coin expands opportunities for payments, on-chain FX, trade finance, commerce and broader digital asset markets use-cases. The launch is symbolic of a shift in crypto markets towards greater and greater utility value from blockchain infrastructure.

— Jeremy Allaire (@jerallaire) June 16, 2022

Back to the project’s page, Circle promises “multi-currency digital banking and near-instant foreign exchange, where daily volume in traditional markets can top $6.6 trillion globally.” As we read a while ago in the Bitcoinist Book Club, “The Bitcoin Standard” explains how that huge market emerges just to solve “the age-old problem of lack of coincidence of wants.” As explained by Saifedean Ammous, the process goes like this:

“The seller does not want the currency held by the buyer, and so the buyer must purchase another currency first, and incur conversion costs. As advances in transportation and telecommunications continue to increase global economic integration, the cost of these inefficiencies just keeps getting bigger. The market for foreign exchange, at $5 trillion of daily volume, exists purely as a result of this inefficiency of the absence of a single global homogeneous international currency.”

As Circle’s numbers show, since the book’s publication the foreign exchange market kept growing. And since we’re far from living in a bitcoin standard, with a “single global homogeneous international currency,” the foreign exchange will keep growing. And that’s where Euro Coin comes in. 

ETH price chart for 06/16/2022 on Kraken | Source: ETH/USD on TradingView.com
The New Stablecoin’s Characteristics

  • Where will the money that backs the operation be? “Circle will hold euros in euro-denominated banking accounts at leading financial institutions, beginning with Silvergate Bank in the U.S.”

Related Reading | Crypto Company Circle Seeks To Become Global Digital Currency Bank

  • “Businesses can use a free Circle Account to mint and redeem Euro Coin at no additional cost”. Circle can afford to treat businesses like that because they’re that big and established. 
  • Circle will audit the Euro Coin. “Grant Thornton LLP will be issuing monthly attestations of Euro Coin reserves, starting with an attestation for the month of July 2022. Circle will publish the attestation reports on this webpage, with July’s report being available to view online by the end of August 2022.”

It’s also worth noting that the main criticism the project received was because they choose Ethereum to start with. However, Circle promises the Euro Coin in other blockchains soon. And considering that USDC exists in every smart contract-enabled blockchain under the sun, there’s no reason not to believe them.

Featured Image: Screenshot from Circle’s website | Charts by TradingView

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How The Tether Peg Could Predict Raging Bitcoin Volatility

The whole UST debacle has seen traders emboldened in the market against stablecoins. The result of this had been more investors going after the pegs of other stablecoins such as USDT and trying to see if they can destabilize the coin. Most prominent of this had been Tether USD, whose peg saw the most opposition as its peg to the U.S. dollar was heavily challenged. This challenge suggests that there could be more volatility coming.

Tether Challenge Ramps Up

One thing to note is that periods of challenges like these are mostly arising from periods of extreme market stress and liquidations. Such were the market conditions for the last week after the UST de-pegging. This ultimately leads to large deviations in the price of stablecoins such as USDT and USDC when it comes to the $1 peg. Although in this case, the majority of the deviations were recorded in USDT alone as USDC held up better in the market.

Related Reading | Bitcoin Marks Seven Consecutive Red Candles, Paints Gruesome Picture For Market

Tether (USDT) which has always operated under high scrutiny from some in the market had begun trading below its $1 peg after the UST news broke. This gap would grow a bit wider with time although the stablecoin would regain its peg once more. However, the scrutiny that accompanies the stablecoin explains why it was the obvious target of the market. 

USDT loses dollar peg following UST crash | Source: USDT/USD on TradingView.com

This had inadvertently created an opportunity for funds that had access to Tether redemptions. These funds had been able to take advantage of this slight de-pegging and presumably profited off it until the digital asset could return to its 1:1 peg.

More Volatility Coming?

On Thursday, the market saw one of the highest yearly volatility trends in a one-day period. This volatility had been brought on by the massive sell-offs that rocked the market, although this volatility has since declined since then.

Related Reading | Ethereum Hashrate Breaks All-Time High, Will Price Follow?

However, with the USDT peg being continuously challenged in the market, there may be more volatility yet to come. If a stablecoin such as USDT, which is currently the largest stablecoin in the market, were to lose its peg, it would no doubt have an even worse impact on the market than UST did. Basically, a de-pegging such as this could see the market dive deeper given that more than 50% of all open interest in the derivatives market are USDT collateral-based.

The asset also shares the most trading pairs of any other stablecoin. So a de-pegging could lead to historical level short squeezes which would essentially cripple the market. Also, an event like this would set mainstream acceptance back years as more people would become fearful of the market. 

Loss of USDT peg could lead to extreme volatility | Source: Arcane Research
Featured image from CoinGeek, charts from Arcane Research and TradingView.com

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Investors Make For Stablecoin Hills As USDT Volume Touches All-Time High

With the market in turmoil, crypto investors are beginning to turn to stablecoins such as USDT and USDC to provide cover from losses. These stablecoins which are pegged to the U.S. dollar have been the obvious winners from the recent crash but it seems that investors are taking it one step further this time around. USDT volume across the Ethereum blockchain shows that investors are ramping up their activities in these stablecoins.

USDT Provides Much-Needed Cover

Through the crypto market downtrend, only a handful of cryptocurrencies have managed to retain their values. They were all stablecoins, and although some of them had lost their peg, the majority had been able to retain and provide some much-needed cover for investors. The sheer amount of volume of USDT being moved by investors on a daily basis is a testament to the fact that investors are converting to stablecoins to weather the bear market.

Related Reading | Market Downtrend Trigger Bitcoin Inflows From Institutional Investors

On May 12th, the volume of Tether USD being transacted on the Ethereum network reached a new all-time high. Data shows that more than $33 billion worth of USDT was moved across the network. This is significantly higher than the $24.5 billion in USDT that was transacted on February 4th, 2021, the previous all-time high.

USDT-U.S. Dollar peg at $0.9990 | Source: USDTUSD  on TradingView.com

However, the motives behind both records had been the same; investors getting out of highly volatile digital assets into an asset that offered a measure of stability. These investors did not wish to cash out their digital assets to fiat currencies just yet and assets like USDT or USDC provide the perfect place to park funds while waiting out the bear market.

Ethereum Fees Skyrocket

One thing that investors moving into stablecoins such as USDT has brought with it is increased transaction fees on the Ethereum network. With so much volume being moved across hundreds of thousands of transactions, the network is expectedly congested and as such would have to increase gas fees to be able to process these transactions.

Related Reading | Ethereum Tumbles To 10-Month Lows As Sell-Offs Intensifies

This was the case on May 12th as the network had recorded a large number of transactions. Gas fees on the network for a single USDT transaction were shown to have risen as high as $20 during this one-day period. As many as 182,000 Tether transactions had been carried out in the 24-hour period.

Despite this high demand for the stablecoin though, the market cap has not reflected this. Instead of increasing, it is down by 3.34% in the last 24 hours. Nevertheless, it remains an investor favorite as it is the largest stablecoin in the market.

At the time of writing, one USDT is selling for $0.9988, maintaining a close peg to the U.S. dollar.

Featured image from Wccftech, chart from TradingView.com

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Conquering Terrain: Terra’s Stablecoin UST Is Now Crypto’s Third Biggest

Terra’s US dollar-pegged algorithmic cryptocurrency UST is moving up the ladder and now ranks third in terms of overall market capitalization.

Today, the fast-growing Terra USD (UST) stablecoin from the Terra ecosystem passed another pivotal point, reaching a market valuation of more over $17 billion.

As of Tuesday, UST had eclipsed the BSC-based stablecoin BUSD in market capitalization by more than $67 million.

UST was operations in September 2020. To mint an equivalent amount of UST, a user must burn a reserve asset such as Terra (LUNA).

UST Making Headlines

This year, the Terra blockchain network has been the talk of the crypto world. Following its participation in the broader market downturn over the weekend, Terra’s native cryptocurrency LUNA has had the highest 24-hour bounce.

Terra (LUNA) is currently trading 15% higher at $90, with a market valuation of $32 billion. Terra has surpassed Cardano’s ADA to become the eighth-largest cryptocurrency by market cap as a result of this development.

As of this writing, the leading stablecoin is Tether (USDT), which has a market cap of $82 billion. USD Coin (USDC) is ranked second with a market cap of nearly $50 billion.

Suggested Reading | Terra (LUNA) Outperforms Popular Cryptos Ether, Dogecoin In The Past 24 Hours

LUNA total market cap at $31.10 billion on the daily chart | Source: TradingView.com

UST is formed by burning a single terra (LUNA), the Terra network’s original crypto currency.

Other sorts of decentralized stablecoin projects, such as Makerdao’s DAI, rely on an over-collateralization procedure to maintain the token’s peg to the dollar.

The value of Terra’s stablecoin UST has increased exponentially during the last 509 days, or 16 months.

Additionally, recent data indicates that UST has been on a stratospheric rise since mid-November, with the market cap jumping by 525 percent.

Lower Trade Volume

Despite outperforming BUSD in terms of market capitalization, UST trades at a far lower volume compared to its immediate competition, with Binance’s stablecoin witnessing $2.25 billion in trading volume over the last 24 hours compared to UST’s $431.78 million.

On the other hand, Terra has recently made headlines for its Bitcoin acquisition. The Luna Foundation Guard (LFG), its parent organization, has acquired approximately 30,000 BTC to act as a peg and reserve for its UST stablecoin.

But, it has a lot going on behind the scenes. LFG intends to acquire a total of 410 billion dollars’ worth of Bitcoin.

However, similar to the broader crypto market in recent months, bullish pronouncements are doing nothing to boost the price of LUNA.

The token’s price has fallen 12.5% in the last 30 days to $77.30, and it has also retreated 34.3 percent since reaching an all-time high of $119.18 on April 5.

Suggested Reading | Bitcoin Clings To $40K On Easter Sunday As Crypto Seen To Head Lower In The Short Term

Featured image from Cryptonary, chart from TradingView.com