Exclusive: FXOpen executive on Tether, fiat on/off ramps on DeFi, and Crypto for FX brokers
“Ultimately, the Tether situation with its benchmark is not really likely to affect the desirability of crypto among FX and CFD traders as they mostly trade decentralized assets against major fiat currencies, usually the US Dollar.”
The rise and fall of LUNA and the Terra stablecoin has pushed other stablecoins to ‘high alert’, particularly Tether, which has been under fire for lack of transparency although the token’s issuer claims that 100% of USDT is backed by bank reserves and loans.
Even prior to LUNA’s collapse, hedge funds were already lining up to bet against Tether. Now, apettite may have only gotten bigger. Since May 10, Tether (USDt) plunged from an $83 billion market cap to $72.5 billion. More than $10 billion wiped out in less than a month. The price of USDt, however, has been able to hold its ground.
Natalia Zakharova, Head of Global Sales at leading FX brokerage firm FXOpen, shared his thoughts on the matter as the cryptocurrency market increasingly gains attention from FX and CFD traders.
The world’s most well-capitalized stablecoin
“Tether managed to survive this particular market event that saw the stablecoin briefly lose its one-to-one US dollar peg, however, a lot of emphasis is being placed on Tether being a bridge between fiat currencies and cryptocurrency.
It is worth considering that outside of the stabelcoin arena, there are many decentralized cryptocurrencies and DeFi exchanges that operate as efficient fiat on and off ramps and are actively promoting this as a feature of their platform and not just focusing on Bitcoin and other altcoin storage and trading.
In a decentralized environment, there are no pegs to fiat currencies and therefore they have their own stature in the markets and aren’t subject to benchmarking issues.
Therefore, the market could take to the decentralized platforms and look at how they act as a fiat on/off ramp especially as many are now embracing the Ethereum L2 infrastructure and most native tokens are built on Ethereum topography.
That said, Tether remains the world’s most well-capitalized stablecoin, so there is enough invested capital to see it ride a potentially bigger storm unless values dip dramatically. If some degree of funds get pulled out, it may well be that other stablecoins will step up, or those investors who pulled out could go the decentralized route.
There has already been a purge of the less reputable cryptocurrency-related projects, so it is likely that the market will react itself without any interference from authorities. It may even be that the USDC stablecoin is less attractive these days than some native tokens on effective decentralized platforms.”
Crypto, a valuable business for retail FX and CFD brokers
“Cryptocurrency has already become a mature market, and unlike other areas of investible stores of value, it is a diversified ecosystem which ranges from trading against fiat currencies to technological functionality such as the smart contracts that Ethereum’s underpinnings provide.
It appears to be less critical among investors and traders whether a cryptocurrency token or digital coin is tied to a fiat coin, and the volatile markets which took place last year involving Bitcoin and 5 altcoins after Elon Musk’s infamous tweet demonstrated that this type of volatility is welcomed by investors, as many bought in just after Elon Musk’s tweet crashed the market by almost $1 trillion.
Bitcoin and Ethereum gained the most new investors and if we are talking purely about the trading aspect of these crypto assets rather than the role in the technological advancement of decentralized finance that they play, then certainly decentralized crypto will likely remain a valuable business for retail FX and CFD brokers, some of which already make a lot of revenues from crypto-derived CFD products.
Ultimately, the Tether situation with its benchmark is not really likely to affect the desirability of crypto among FX and CFD traders as they mostly trade decentralized assets against major fiat currencies, usually the US Dollar.”