Professional and institutional investors are looking towards cryptocurrencies as initial scepticism is vanishing and more stable offerings are being put forward.
For instance, Basis announced in April 2018 that it had raised US$ 133 million in funding from Bain Capital Ventures, seasoned hedge fund manager Stan Druckenmiller, former Federal Reserve governor Kevin Warsh, Lightspeed Venture Partners, Foundation Capital, Andreessen Horowitz, WingVC, NFX Ventures, Valor Capital, Zhenfund, Ceyuan, Sky9 Capital, Digital Currency Group, and others.
The mechanism to counter volatility of the Basecoin price will be to tackle supply-and-demand discrepancies. When demand is rising, the system will create more Basecoins, and when demand is falling, the Basis will reduce the supply to support the price. Essentially, supply and demand are expanded/contracted as needed to maintain the pegging to the US$ and thereby make Basecoin attractive to professional investors who thus far shied away from cryptocurrencies due to excess volatility.
One could argue that the first step has been made. Professional investors are ready for stable coins. Fluzcoin is another one that shows great promise due to broad applicability for retail usage, for loyalty schemes, and for professional investors seeking sustained growth.
Fluzcoin’s Artificial Intelligence (AI) algorithm, EUNOMIA, overcomes crypto-economic volatility with real-time, computer-aided market corrections to the Fluzcoin supply and demand. The value generated by minting new Fluzcoins is maximized by Fluzcoin holders in the form of dividends; meaning the accumulation of Fluzcoin results in an appreciation path similar to traditional cryptocurrencies even though the value of an individual Fluzcoin may never skyrocket.
Fluzcoin’s patent-pending (U.S. patent pending 62/648,206) coin minting approach creates additional value without the need for energy intensive crypto-mining infrastructure. While the main objective of Fluzcoin is to address the four major downsides transaction speed, transaction costs, compliance, and excess volatility of earlier cryptocurrencies to make it attractive for everyday consumers and retailers alike, there are substantial benefits that spill over to professional investors.
There is a bit of irony here: The initial cryptocurrencies were meant for payments and due to their speculative nature and the above shortcomings are not purpose fit for use in everyday transactions. Also, due to excessive volatility they may have scared away professional and institutional investors. Only the coins developed for retail use may actually attract the professional investor.
The second step is adoption by public institutions as a store of value and as a replacement of gold and foreign fiat in countries’ international reserves. Of course, this could take a very long time, even after the private sector has embraced and accepted it. Governments move slowly. Decision processes are political. On the other hand, as soon as one government is known to have bought its first stable coin into its reserves, others may stampede in.