Opium‌ ‌Protocol Allows Traders to Hedge or Bet Against the Stablecoin Tether’s Solvency

Cryptocurrency merchants can now shield their tether tokens or guess towards the solvency of the stablecoin by leveraging a brand new crypto derivatives product from the Opium Protocol. Opium founder, Andrey Belyakov, claims the product is the “first CDS (credit score default swap) on a centralized stablecoin.”

The stablecoin tether (USDT) is the hottest dollar-pegged token on the market in the present day, because it captures a big market cap and important commerce quantity. Tether’s market valuation is round $14.1 billion and the token has round $13.6 billion in world commerce quantity on Sunday afternoon.

As well as to the stablecoin’s recognition, being primary comes with important criticism.

Over the previous few years, various folks have speculated on whether or not or not tether (USDT) is backed by actual . Particularly given the proven fact that roughly $10 billion price of the market cap grew in 2020.

In the spring of 2019, court docket paperwork revealed that each tether was supported by “money and money equivalents.” The founding father of the Opium Protocol, Andrey Belyakov, says his workforce has designed a credit score default swap (CDS) on USDT.

The brand new CDS will permit customers to shield their funding in USDT or even guess towards the controversial stablecoin. “Opium Protocol is proud to announce the very first CDS (Credit score Default Swap) on a centralized stablecoin — USDT,” Belyakov detailed in a weblog submit.

Belyakov additional added:

You should utilize it to shield your self towards (or speculate on) a systemic failure of the most generally used stablecoin in crypto. It additionally permits you to earn curiosity in your capital in case you might be prepared to guess on the high quality and sustainability of USDT.

Belyakov defined that monetary merchandise like derivatives are excellent for centralized stablecoins and “CDSs are used to insure towards credit score default occasions.” The Opium founder notes that these centralized stablecoins will be outlined as “credit score notes.”

“For instance, USDC will be considered a credit score issued by Coinbase, GUSD is issued by Gemini and USDT is issued by a agency known as Tether, which is intently related to Bitfinex,” Belyakov particulars.

The Opium founder highlights that USDT particularly has been scrutinized over the firm’s reserve standing. Belyakov additionally reveals the challenge will leverage Chainlink’s worth oracle tied to the USDT-USD worth and he believes the product can be an important instrument for threat administration going ahead.

“[Opium Protocol is] utilizing a decentralized Chainlink worth oracle to set off the by-product logic in the most dependable approach,” Belyakov concludes. “At maturity, a USDT-USD worth oracle is used to decide whether or not the market worth of USDT remains to be on a peg or has fallen under $zero.95 USD — which might pay out the collateral to the CDS purchaser. For instance, if USDT is traded at 70 cents per greenback at maturity the CDS holder will obtain 30 cents per greenback to compensate for a loss.”

What do you concentrate on the Opium Protocol’s new crypto derivatives product tied to the stablecoin tether? Tell us what you concentrate on this topic in the feedback under.

Tags on this story
Andrey Belyakov, Bet Against, CDS, CDS holder, Court docket, Greenback-Pegged, hedge, Opium founder, Opium Protocol, Stablecoin, Stablecoin Financial system, Tether, Tether’s Solvency, USDT

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