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27 February 2020

Stablecoins and Exchange Coins - What's the Difference From the Ol' Corporate Bond? - Bitcoin News

Stablecoins and Exchange Coins - What's the Difference From the Ol' Corporate Bond? - Bitcoin News

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A new weekly record was set last week in global corporate bond sales, with investors grabbing hold of around $140 billion in new bonds according to data from Dealogic.

The near ubiquitous presence of coins like USDT on major exchanges, and the still nascent wave of exchange tokens like Binance’s BNB, signal a new era of cryptocurrency trading and investment.

Corporate bonds are a debt security a lot like government bonds, but with generally higher interest rates due to higher risk.

Like corporate bonds, both stablecoins and exchange coins have a value dependent on the success of some external entity or asset.

With non-pegged, non-exchange assets like bitcoin, there is volatility.

In a nutshell, most stablecoins, exchange tokens and corporate bonds are tied to the devaluation trajectory of the world reserve currency, the U.S.

Returning to the above quoted statement from Coinbase’s USDC webpage, marketing stablecoins and exchange tokens as means by which to allow “unbanked and under-banked individuals in any country to hold a US dollar–backed asset with nothing more than a mobile phone” seems more than a bit deceptive.

As with investors in these bad bonds, users of stablecoins and exchange tokens must put their faith in the company’s success and track record, and not in the currency or protocol alone.

An oversight being made in the crypto space today, however, is to compare things like fiat-pegged stablecoins and exchange tokens in an apples to apples fashion with non-pegged, free market assets like bitcoin?

While the USD reserve paradigm affects all markets, the critical difference between non-pegged, permissionless assets and corporate bonds, fiat stablecoins, and exchange-native tokens, is that ultimately the latter three are tied to businesses and pre-existing financial paradigms, where the former are their own entity, free to move and grow even in the absence of legacy banking systems, or a sudden corporate default.

What are your thoughts on the difference between stablecoins/exchange coins and corporate bonds.

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