In the age of cryptocurrencies, investors need an iron stomach to withstand dramatic fluctuations in prices. Ripple, one of the major altcoins, went from under $1 per token in late December 2017 to over $2.50 around January 5, back down to $0.80 by January 16, and back up to just over $1.50 at time of writing. These huge spikes can make lucky day traders a fortune, but most are left with anxiety over what causes these price runs and drops.
Ultimately, prices for cryptocurrencies are determined by a relatively small market of buyers and sellers. Since most of these investors are fairly trigger happy when placing orders, an excess of buys or sells at any one time can lead to huge price movements. While there is an upward trajectory for most cryptocurrencies, they seem to fall or rise back to “true prices” after any significant fluctuation.
TrueCoin is a new type of cryptocurrency called a “stablecoin.” TrueCoin has some regulations in place to determine true price appreciation and depreciation and meets excess supply and demand with their money supply. Similar to the gold standard, when a $1 bill could be exchanged for $1 of gold, one TrueUSD is always redeemable for one U.S. dollar.
Since TrueCoin is 100 percent USD collateralized and offers monthly transparent audits of these holdings, investors can trust they are actually investing in something real. With this collateral and the introduction of enforceable investor rights, it is evident that the TrueCoin team is approaching cryptocurrency from an innovative angle.
The founding team includes members from Google, Stanford, and Palantir, and they have raised funding from Stanford’s StartX, FJ Labs, and Blocktower Capital. They have collaborated with legal firms to create various legal protocols and investor rights. Also, they have secured some fiduciary partnerships due to the high quality and transparency of their network.
What does this mean for the industry moving forward?
South Korea and China have been the most vocal countries regarding potential restrictions on cryptocurrencies, and even the United States and Russia have announced potential regulations to protect investors.
The primary concern for these countries is whether there is actual value in the currency and how they can protect investors from a potential market crash. Though outlawing the technologies is possible, it is unlikely. More realistically, new regulations will come out that are intended to limit risk for investors.
Since much of this risk stems from the lack of “real value” and price volatility, a logical next step would seem to be 100% collateralizing crypto investments with USD and establish price regulators.
If price volatility continues to be a problem for the industry or if pump-and-dump schemes become an epidemic, price stability will likely become something crypto investors flock to.
No matter what, TrueCoin should help illuminate how different cryptocurrencies attempting to solve the same problem can take drastically different approaches with differing levels of success. Tether is currently the primary stablecoin, but it has fallen under scrutiny and lost trust due to a lack of transparency and the temporary freezing of withdrawals.
From a certain perspective, Tether and TrueCoin are similar, but the underlying technologies and businesses have different values. Take the time to get educated about any currency you invest in and understand how they are trying to approach their product. That is the only secure way to do actual value investing with cryptocurrency.