Hello, everyone. I am Miu. Today we will introduce the basic knowledge that you must know in the field of crypto investment. What is a stable currency? No one should scold me for using the big A as a title party and stepping stone.
First of all, we all know that for ordinary people, there are no good investment opportunities in China. Whether it is the A-share market, bonds, or real estate, it is basically difficult to make a profit.
However, through stablecoins, we can easily earn risk-free returns of at least 10% annualized rate in this industry. By discovering some opportunities, we can seize the short-term 40-50% or even 100% annualized rate.
First, let’s understand what stablecoins are, including how these stablecoin companies make money.
Stablecoins, as the name implies, are very stable. For example, cryptocurrencies such as ETH, BTC, BNB, etc. will rise and fall sharply. But no one would say that stablecoins will rise and fall sharply.
The core concept of stablecoin is that its price is always fixed at 1 US dollar.
Common types of stablecoins include fiat-collateralized stablecoins and cryptocurrency-collateralized stablecoins.
Fiat currency collateral types include: usdt, usdc, etc.
Crypto-collateralized stablecoins: DAI, USDE, etc.
USDT is the most widely used stablecoin with the largest market value. Its current total market value has reached 116.1 billion US dollars.
Investors and traders use Tether for liquidity, the ability to move in and out of cryptocurrency positions without large price swings. In the past 24 hours, Tether's trading volume reached $38 billion, making it the most liquid cryptocurrency, even more liquid than Bitcoin. Not only is it the largest stablecoin, it is also one of the largest cryptocurrencies by market capitalization.
USDT was launched in 2014 by Tether, a subsidiary of Hong Kong-based iFinex, which also owns the Bitfinex cryptocurrency exchange.
Tether claims that for every $1 of Tether issued, they will keep $1 of real assets in reserve.
Let’s use a picture to understand how USDT works and how this company makes money from this business.
By reading the audit report, we can see that most of its users’ cash assets are used to purchase U.S. short-term Treasury bonds. According to the current risk-free return of 5.3% on U.S. short-term Treasury bonds, this income alone is enough for Tether to make about $6 billion. Simple business model, huge profits. Now you know why so many companies want to do the stablecoin business.
Since USDT is centralized, we can only trust its real asset reserves by trusting third-party auditing companies. And its specific asset custodians and managers cannot be found in its audit reports.
BDO is a world-renowned accounting and auditing firm that has taken over the audit of TEDA since 2022. The company has actually had a series of audit scandals in the past.
Therefore, the transparency and security of USDT has always been a controversial issue. Of course, most users are not serious about it. With a large market share, it has become the leader of the encrypted dollar.
Next, let’s take a look at the second largest stablecoin USDC, which is issued by Circle, a US company. At the beginning of its establishment, the company received investment from Baidu Ventures, yes, the venture capital company founded by the largest search engine in China.
USDC is the second largest stablecoin in circulation after USDT, with a total market value of about 34 billion US dollars. Its means of making money are the same as USDT, and its main income is composed of some cash income products such as short-term government bonds and money funds. Its income is expected to be about 1.7 billion US dollars.
However, USDC's compliance and transparency are much higher than USDT. Its assets are held by Bank of New York Mellon, managed by BlackRock, and regulated by the US SEC. The audit report of USDC's asset reserve certificate is released once a month, while USDT is released once a quarter.
Therefore, USDC is still much more credible than USDT, but USDT is much more credible in the market. After all, USDT was issued 4 years ahead of USDC, and many exchanges and users are already familiar with using USDT, a crypto-dollar asset. Just like when you say U today, most people will think you are talking about USDT, including the USD-A, B, C, D, E on the market. Each different alias means a different version of the crypto-dollar. For most users, it is enough to know USDT and USDC. For advanced users, we can talk about other stablecoins later.
Of course, the value they promise is the same, which is to redeem one dollar of cash assets. At present, from a legal perspective, USDC is more reliable, but of course USDT is more convenient to trade.
