Security coins or stablecoins, which digitise a variety of “real world” assets, are a huge trend today. This unique group of coins became of great importance because they enable investors to store value that is not related to the fiat currencies, most of which are prone to inflation and volatility risks. On the other hand, there are well adopted cryptocurrencies available, but without an inherited value. The common enabler is an underlying blockchain technology which provides to both opportunities to be traded.
What are the values to be looked for when consider investments, or in other words what are the appealing characteristics of both?
We can say cryptocurrencies derive their value from supply and demand ratio, backed by the distributed ledger technology (DLT) which ensures a high level of transparency. On the other hand, there are also value fluctuation and volatility as the main challenges for the adoption of cryptocurrencies in the digital payment industry. As many investors are focused only on speculative trading driven by price and volatility, they fail to understand the real value of cryptocurrencies. Cryptocurrency value fluctuation is the result of demand fluctuation which depends also on (not really elastic) supply. All this together remain unclear what is the fundamental value of the cryptocurrency.
As the market becomes more accessible to investors, we see the purpose of a stablecoin is going beyond being just a financial contract. When it comes to supply, because asset backed coins have a fixed amount of asset backing it, there can’t be a large number of them in circulation. As such, they allow a higher degree of compliance. They also permit the fractionalization of ownership of valuable assets, so that more investors could own portions of the same asset. But why would investors switch to security tokens anyway? Stablecoins protects traders and investors during volatile markets. In a bear market, traders can protect their position by flipping their cryptocurrencies to a stablecoin, without leaving crypto, blockchain enabled eco-system.
A simple equation can explain a likeliness of further increase of attractiveness of the stablecoins: less cryptocurrency demand = less the real value is, which leads to more stablecoin demand = higher stablecoin value.
Demand for the CUPRUM Coin
When we look at a CUPRUM Coin in particular, we need to examine two basic questions: what is the primary purpose of the asset and how the asset derives its inherited value? Both answers can be directed toward an asset itself. Namely, CUPRUM Coin backed asset in the form of Cu powder is highly demanded, unlike other backed assets, in the new industries or industries of the future. This means demand will be there uncompromised. In the context of the mentioned prevention from the crypto world high volatility, we can name it “the safe harbour for a both-direction volatile crypto time” as well.
By Darko Parun