As Bitcoin (BTC), the world’s largest cryptocurrency, battles to regain from a severe fall, regulators and the private sector have turned their attention to stablecoins, a subset of digital currencies.
Meta Platforms Inc (FB.O) has begun testing its stablecoin payments wallet, while Visa (V.N), the world’s largest payments processor, has created a crypto advising service and stated that stablecoins, rather than cryptocurrencies, may become the next medium of exchange.
Stablecoins are a type of virtual money with values tied to real assets like the US dollar or commodities, and their fame has prompted central banks throughout the world to consider digital versions of their currencies.
Visa’s action has been praised by analysts at digital platform Alkemi Network as proof that the cryptocurrency and decentralized finance ecosystem is getting to maturity.
“As a movement within the cryptocurrency industry, making a visible attempt to play by traditional finance standards is undoubtedly getting pace,” they stated.
Last Monday, Japan’s financial authority announced that in 2022, it will release guidelines restricting the issuing of stablecoins to wire transfer companies and banks.
In the United States, Treasury Secretary Janet Yellen and a group of bank CEOs debated the necessity to regulate stablecoins, even as top executives from key cryptocurrency startups like Coinbase (COIN.O) and Circle pushed Congress to give clearer customized legal backing for the market.
Novi, Meta’s cryptocurrency wallet, will allow users to send and make money using WhatsApp, the social media giant’s messaging tool, and will use the Pax Dollar stablecoin.
Stablecoins have increased significantly in the last month, according to Delphi Digital, with the market capitalization of the top five stablecoins rising to roughly $150 billion from $129 billion. Tether, the most valuable stablecoin, is worth $76 billion.
Meanwhile, after testing project Jura, named after the mountains that separate the two countries, the central banks of Switzerland and France declared success in Europe’s first cross-border experiment of central bank digital currency (CBDC) transfers.
Hunters for Savings
Since bitcoin’s flash crash on December 4, the market capitalization of the 15,541 coins on the CoinMarketCap platform has been restricted at $50,000 for much of the week, compared to $2.6 trillion at the start of December.
Even in a higher-inflation climate, cryptocurrency has benefited from better cash circumstances, but it’s tough to predict what will happen when the Federal Reserve tightens monetary policy or prepares to raise rates, according to Chris Weston, head of research at Melbourne brokerage Pepperstone.
“I believe there would be headwinds, but the only thing you can have with crypto is an open mind,” Weston added.
A new breed of bargain hunter has evolved. According to research from Arcane Research, the number of active bitcoin addresses reached 1 million after the drop, the greatest level since the cryptocurrency plunged 35% in May.
“The volatility appears to have awoken slumbering bitcoin holders,” Arcane experts said.
MicroStrategy Inc (MSTR.O), helmed by Michael Saylor, was a big dip buyer, adding 1,434 bitcoins to its holdings for $82.4 million last week, according to the business.
However, the number of bitcoin wallets with more than 1,000 tokens declined last week, possibly signaling profit-taking by larger participants, according to Kraken Digital.
According to a poll of 500 worldwide institutional investors performed by Natixis Investment Managers, cryptocurrency topped the list of assets predicted to face a correction in 2022.
In a separate Visa survey, 40% of worldwide crypto owners said they would transfer their primary bank to one that offers crypto-related goods in the next year.
According to the Natixis poll, just four out of ten institutions consider Bitcoin (BTC) to be a viable investment alternative, even though 90 percent of those who have previously invested in crypto anticipate keeping or expanding their allocation in 2022.