Adding Stablecoins as Part of a Balanced Portfolio | BanklessAfrica Newsletter #3
This is BanklessAfrica Newsletter, a newsletter to help you stay up to date with well-curated news about crypto and Web3 around Africa.
Hey, BanklessAfrica fam!
Welcome to Issue 3; this week has seen a report indicating record-breaking investments in Web3 in Q1 on the continent amidst regulatory pressure and a bearish market. From an entrepreneurial standpoint, the more problems in a particular market the more the opportunity. Will we see the same growth in Q2?
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As of May 28, 2022
∘Top Assets by Market Cap
Name: Bitcoin (BTC) Price: $28,848.38 7d % : -1.91
Market Cap: $548,662,623,303
∘ Biggest Gainers of the Week
Name: Sweet SOL
7d %: +3274.16
Volume (24hr): $141,795
∘ Biggest Losers of the Week
Name: Tifi Token
7d % : -100
Volume (24hr): $11,580,070
Adding Stablecoins as Part of a Balanced Portfolio
If you were one of those people who held a coin or two during the recent market dip in May, you would agree with me on how great a loss it was for everyone in the market. The most popularly traded cryptocurrency in the digital market today, bitcoin (BTC), still experiences wild fluctuations in its value, dropping from its peak of nearly 65,000 USD in April 2021 to a little over 28,000 USD, losing almost 50% of its value. While it might be great for experienced traders, to think the single-day fluctuations of some cryptocurrencies can be more than 10% within hours is rather scary for most people.
Undoubtedly, this volatility can be harmful and discouraging to new traders and investors, especially the new ones. Inexperienced traders could end up with a substantial loss if they choose to buy at the top and then panic-sell at the bottom. Likewise, people wanting to use BTC or other cryptocurrencies as a medium of exchange for payments or remittances, could find themselves out of pocket if they rely on the short-term value. BTC was in fact originally conceived as an alternative payment method and its adoption for this purpose continues to grow despite the speculative nature of its trade.
For a coin to have real utility as a means of exchange, it must assure its users stability while maintaining its purchasing power. This is what a stablecoin aims to achieve.
Stablecoin is a term used to describe cryptocurrencies whose value is tied (pegged) to the worth of a fiat currency such as the U.S. dollar. Although the value of a stablecoin may fluctuate somewhat, there are a variety of mechanisms in place to ensure that it remains equal in value to the currency or asset it is pegged to. For instance, the stablecoin BUSD (Binance), is pegged to the U.S. Dollar (USD). It means one unit of BUSD has the same value as one unit of the U.S. Dollar held in traditional banks. BUSD is just one of the numerous stable coins. Others include USDC (Circle), USDT (Tether) and GUSD (Gemini).
Stablecoins aim to reduce and stabilize the high volatility of cryptocurrencies, which is one reason investing in and transacting with stablecoins could be more suitable amongst Africans. According to Coinbase, "you can think of these as crypto dollars".
So as an African who is seeking opportunities to hedge their assets with investing and/or trading in the digital market, here are reasons to consider stablecoins.
Stablecoins are usually tied to the value of government-backed currencies and assets (like the dollar, pounds, and gold stock), which are well-regulated, more stable and widely recognized. This attachment, in turn, gives you the assurance — that the value of the digital asset won't rise or fall as long as the value of those fiat currencies and assets remain the same.
Trading or Saving
Stablecoins can do more than just assure you of a sound experience in the digital market. Owning a bank account is not a prerequisite for holding a stablecoin or cryptocurrency. Stablecoins are safe and stable ways to keep your money; you can own and save as much as you want, for as long as you want.
They can also be used for your day-to-day cash transactions. You can easily transfer your stable coins within and over the borders of Africa, seeing as they are accepted globally.
Low Exchange Fee
Trading with stablecoin is a good way to support your transactions while minimizing your transfer fees between crypto exchanges. For instance, let's say you need to get some Solana with your Ethereum. Seeing these currencies exist on two different blockchains, the experience might be rough and expensive. Fortunately, stable coins can be used to bridge this gap between them.
All you need to do is convert your Ethereum to a stablecoin like Tether (USDT), which runs on the Ethereum blockchain and buy the Solana with your stablecoins.
While some crypto exchanges charge a trifling fee for changing the almighty dollar to stablecoins, others don't charge a fee at all.
High Interest Rate
Crypto traders also use stablecoins as a form of advanced investments by staking, lending or borrowing. You will be amazed at the different ways to earn interest (yields) with them — returns that are higher than what you would get at a traditional bank.
Over the years, stablecoins have proven to possess a number of benefits, irrespective of how you utilize them. They help to reduce volatility in the market, they can be used for transactions and exchanges on DeFi platforms, and are well recognized all over the globe. However, like any new technology, stablecoins also have their shortcomings; the recent de-pegging of LUNA is a good example. Nonetheless, in the fight for low volatility, stablecoins play a relevant role in achieving relative balance.
This article does not constitute financial advice. Traders and investors should always conduct their own research and make decisions relevant to their personal circumstances.
📰 News and Opinion in and Around Africa
Author: Precious Udeorah
The more we grow into the Web3 space, the more adoption we see. From little or no interest, we are beginning to see resources and investment being poured into the Web3 in Africa.
For the first quarter of this year, we have seen companies develop an interest in blockchain, with some even going as far as educating people to get more hands involved with blockchain technology.
This attraction has seen investments in the space skyrocket. A report produced by Cointelegraph highlights that the Web3 sector received the highest proportion (26.5%) of Venture Capital investment this first quarter of 2022. All we can say is that there is no room to slow down. We are still just getting started!
Author: Andrew Rummer and Kristin Majcher
With activities in Web3 escalating, a crypto hub seems to be a great next course of action. After legally recognising bitcoin, we see the Central African Republic making commendable next steps.
Project Sango includes plans to:
found a digital bank
facilitate land purchases in bitcoin
create a digital wallet product.
Author: Tanzeel Akhtar
The Central Bank of Nigeria has ordered the closure of all accounts owned by crypto users. This was announced in a CBN letter signed by the Director of Banking Supervision, Bello Hassan, on February 5. According to CBN, this is a reminder to all banks that every cryptocurrency transaction is prohibited. So all financial institutions must identify and close down, with immediate effect, every account actively involved in crypto exchanges, otherwise face severe sanctions.
Blockchain Entertainment Company, AMP Global, Raises $5.6 Million to Expand its Watch-to-Earn Offering
Author: Sultan Quadri
AMP Global Technologies, a blockchain-based video entertainment platform, has raised a $5.6 million seed round with a $2 million investment from MaC Venture Capital. This is to broaden its watch-to-earn offer, similar to how other Blockchain companies operate play-to-earn models, with the goal of creating high-end and impactful content that is rewarding for users via an interactive platform.
Founded by Ghanaian-born CEO Derrick Ashong, AMP Global is the brain behind the Take Back The Mic (TBTM) app. This interactive content platform allows content producers to build a direct relationship with their audience and rewards viewers for their engagement. Content on the platform is created mostly by upcoming rappers, artists, and actors. By doing this, AMP is able to get a large audience of young people online to stream its shows despite the high cost of mobile data in Africa.
With this funding, AMP Global intends to debut its Gateway to the Internet programme, which allows users to buy mobile data with its ethereum-compatible blockchain digital currency, Kola, that they earn through their engagement with content in the Take Back the Mic (TBTM) app. According to Ashong, this is unlike many existing 'play to earn' models because the TBTM system is unique in that it enables users to earn mobile data that they can use on any platform; it simply rewards them for doing what they already do well — discovering and amplifying the best new talents from across the continent.
Ghana Unity DAO $1 million fund is now open!
Ghana Unity DAO, in partnership with Harmony, formally announces the commencement of the $1 million fund to their Web3 community on May 16, 2022. Here is how to apply:
Choose your pillar by stating in the subject bar what category you fall within the Ghana Unity DAOs pillars — community building, economic impact and education.
Also, state your expertise and areas of interest within Web 3 in the subject bar.
Attach a one-page pdf pitch describing your project. Share the background of your team and a breakdown of how you will utilize any capital raised.
Submit your proposals to - firstname.lastname@example.org by June 1, 2022. Successful candidates will be shortlisted on July 1, and the winners will be announced at the WEB 3.0 ACCRA CONFERENCE on July 29.
Best of luck!
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