Stablecoins are serious business, February 17-24

Stablecoins used to be something of a taboo topic in the crypto community after it became common to criticize Tether’s reserve support. Are you really a seasoned crypto investor if you haven’t already gone down the Tether (USDT) rabbit hole? Some of those concerns were finally allayed in May 2021 when Tether passed an assurance test by making its reserves public for the first time. For some onlookers, the reserve breakdown raised more questions than answers due to the stablecoin issuer’s overexposure to commercial paper.

The stablecoin market has grown by leaps and bounds over the past four years. While Tether remains firmly in the lead, Circle Internet Financial has risen through the rankings with the success of USDC Coin (USDC† TerraUSD (UST) is also a top player, having recently received significant support from major venture capital funds.

This week’s Crypto Biz newsletter dissects the evolving business of stablecoins. We also draw your attention to a major acquisition of a major exchange operator that could open the door to new crypto investment opportunities.

Circle’s valuation doubles to $9 billion after revised merger agreement with Concord

USDC operator Circle had a pretty memorable week. On February 17, the company announced its valuation had reached $9 billion, an increase of $4.5 billion in July 2021, after it closed its merger agreement with Concord Acquisition Corp. had revised. Circle’s doubling in value in less than eight months partly reflects the massive growth of USDC, which quickly emerged as Tether’s main competitor in the stablecoin market. Circle was back in the headlines on Feb. 23 after the company had new business accounts launched to support enterprise adoption of stablecoins and crypto payments. Obviously, stablecoins are not just dry powder for crypto investors – they are a gateway to mainstream digital asset adoption.

Luna Foundation Guard Raises $1 Billion to Form UST Reserve Denominated in Bitcoin

Luna Foundation Guard, the nonprofit that supports the Terra USD stablecoin network, has closed a $1 billion funding round led by venture firms Jump Crypto and Three Arrows Capital. All proceeds will go towards setting up a Bitcoin (BTC) denominated forex reserve for Terra’s UST, which could further reduce volatility and better protect the stablecoin’s peg to the US dollar. For Bitcoin investors, the BTC reserves provide a different use case for the dominant cryptocurrency at a time when businesses and even governments are exploring digital asset reserves† Terra’s UST is currently the fourth stablecoin on the market with a total value of $12.3 billion, according to CoinMarketCap.

Tether Cuts Commercial Paper by 21% in Final Proof of Reserves

The crypto market’s favorite FUD inductor was back in the headlines this week after Tether, the company behind the USDT stablecoin, released its latest reserve allocations. For the quarter ended December 31, 2021, Tether’s allocation to commercial paper was reduced by more than a fifth, while exposure to money market funds and Treasury bills increased by 200% and 77.6%, respectively. Tether’s reallocation strategy is likely in response to growing criticism of its commercial paper holdings, which, according to Hindenburg Research, does not provide information about the company’s counterparties. Nevertheless, Tether appears to be meeting its obligations, with its net assets exceeding its obligations. That doesn’t stop new investors from going down Tether’s rabbit hole. Remember: you don’t actually need stablecoins to invest in Bitcoin.

London Stock Exchange to Acquire Cloud-Based Technology Provider Tora in $325 Million Deal

The London Stock Exchange is investing heavily in infrastructure that could expand its crypto offerings, leaving no doubt that major market players have been looking to further integrate digital assets. On February 22, the exchange operator confirmed that it had acquired US cloud technology provider Tora for $325 million. Tora uses a crypto trading solution called Caspian, which collects and presents price and trading information from multiple cryptocurrency exchanges on a single platform. Basically, the software solution allows institutional traders to send order information to cryptocurrency exchanges. It also offers a range of trading and portfolio management solutions. Still think you’re late with crypto?

Before you go!

Do you think meme coins could moon during the next crypto bull market? This week’s edition of The Market Report recommended a lively, if light-hearted, debate on the best meme coins for 2022. I argued for Floki Inu while my colleagues Benton Yaun and Jordan Finneseth presented Shiba Inu and Dogecoin, respectively. Floki Inu finished first in the live poll. Do you agree with the outcome? Watch the replay below and decide!

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