What happened

Today, one of the more distinctive crypto projects is Chillz (CRYPTO: CHZ). This unique cryptocurrency backs a blockchain-based sports entertainment platform, Socios, which allows investors to have a say in the governance of their favorite sports brands. As it happens, the Chillz team and Socios have been on a partnership tear, leading to an impressive rally this month. Today, Chillz is up another 2.8% as of 12:15 p.m. ET. However, over the past month, this token has surged 65.5%, outpacing most major cryptos over this time frame.

On Aug. 1, which is really when Chillz started to pick up steam, Chillz announced a massive $102 million stake in FC Barcelona's Barca Studios. This deal amounts to roughly one-quarter of this endeavor, enabling Chillz to grow its presence in the sports-related NFT and metaverse worlds.

Today, crypto exchange ByBit announced that Chillz would be powering a Fan Token Kickoff for the platform. This contest is expected to run from Aug. 19 to Sep. 2 and give users chances to win 200,000 Tether (CRYPTO: USDT) stablecoins in prizes. 

So what

Given the still-nascent nature of the crypto space, partnerships play an important role for investors in gauging what the growth prospects of a given project are. With the Chillz team clearly in business development mode, this sports-related blockchain platform provider is certainly seeing an uptick in interest.

Now, other projects that have made significant investments in sports-related advertising deals haven't seen the sort of ROI investors might expect. Accordingly, time will tell how fruitful this investment ultimately is.

That said, for those bullish on the future of crypto in the sports and entertainment sector, Chillz is a project worth taking a look at. 

Now what

The whole concept of cryptocurrency being used as a governance or voting tool for fans is certainly an intriguing one. Given the high-profile partnership Chillz has been able to nab thus far, perhaps there's a lot to like.

That said, this project is one that appears to be very niche and prone to risks tied to increased competition and low barriers to entry in this space. Whether Chillz can continue to grow over time will depend on its success with its existing partnerships. Thus, right now, this token is one I'd view as a speculative bet, even with these key partnerships underway.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why cryptocurrency Chillz continues to surge higher today appeared first on The Motley Fool Australia.

U.S. dollar stablecoin Tether (CRYPTO: USDT) is the largest stablecoin by market capitalization in the world and the third largest cryptocurrency period, trailing only Bitcoin and Ethereum. And on May 12, Tether did something it's never done before. The stablecoin is supposed to always be worth $1. But during the early morning hours, it dropped to about $0.95 -- a shocking drop.

Tether's 5% deviation from its $1 peg is particularly jarring right now because of what just happened with rival stablecoin TerraUSD (CRYPTO: UST). TerraUSD lost its $1 peg a few days ago and has traded as low as $0.30 per coin. And it's possible it will never recover.

In this article, let's briefly look at stablecoins and what might be next for Tether and for the cryptocurrency space as a whole.

How the top five stablecoins work

According to CoinMarketCap, the top five stablecoins are Tether, USD Coin (CRYPTO: USDC), Binance USD (CRYPTO: BUSD), TerraUSD, and Dai (CRYPTO: DAI). Yes, shockingly, TerraUSD is still a top five stablecoin by market cap even though it's only worth $0.45 as of this writing.

These stablecoins have different approaches to keeping their values at $1. Tether, USD Coin, and Binance USD keep real dollars in a bank and issue new digital coins at a one-to-one ratio.

This is probably the most intuitive way to build a stablecoin. However, the cryptocurrency community has been reluctant to embrace this approach. After all, what's the point of all of this if we still need real dollars at the end of the day? That's why Dai and TerraUSD approached the problem from different angles.

With Dai, users deposit cryptocurrencies like Bitcoin into vaults using The Maker Protocol from MakerDAO. Once deposited, new Dai is created. But there's supposed to be more collateral in vaults than Dai in circulation. This absorbs volatility in the underlying collateralized cryptocurrencies and the system has historically worked ok -- in times of extreme volatility Dai has deviated from its peg, but it's always managed to regain its $1 value.

Finally, we come to TerraUSD. This stablecoin attempted to control supply to always meet demand. More TerraUSD could enter and leave circulation based on demand by swapping it with Luna. This algorithmic stablecoin was an attempt to be fully decentralized.

Why TerraUSD failed

As mentioned, Tether recently started teetering. But it all started with TerraUSD.

People were putting their money into TerraUSD largely because of the high yield they could get for holding it through the Anchor Protocol. The annual percentage yield (APY) is about 20% -- extremely generous. However, according to DefiLlama, roughly $2.2 billion of TerraUSD was withdrawn from Anchor in 48 hours (May 7 through May 9) while the price of TerraUSD was still near $1.

This quickly flooded the market with TerraUSD coins. Ideally, users would have burned TerraUSD coins and exchanged them for Luna tokens to remediate the sudden supply and-demand imbalance. However, Luna was also falling hard at the time, demotivating users to exploit the arbitrage opportunity. And once this tandem downward spiral started, it couldn't recover. Luna has dropped 99% in value and TerraUSD hasn't been within 1% of its peg in almost four days.

There's much more to this story. But the point is, TerraUSD seems to have failed. And, more broadly, the market has lost total faith in the algorithmic stablecoin system. Consider that Neutrino USD and Waves is a similar algorithmic approach to stablecoins like TerraUSD and Luna. But Neutrino USD is also off of its peg and Waves token has dropped in value.

Some suggest that what happened with TerraUSD was a premeditated attack and there's some evidence of that. However, whether or not someone intentionally flooded the market to shake confidence in the system, the fact is it did happen. And if it happened once, it could happen again.

What's next for Tether

Now we finally come to Tether. During the early morning hours, Tether dropped from its peg. It's hard to decipher exactly what's going on but here's one data point: Curve allows people to exchange cryptocurrencies and its liquidity pool is supposed to be perfectly balanced between Dai, USD Coin, and Tether. As of this writing, Curve is 82% Tether, suggesting people are exchanging it for Dai and USD Coin in masse.

Whether or not someone is behind this isn't the point. The point is confidence in Tether appears to be shaken and it lost its peg as a result.

Unlike TerraUSD, Tether holders have options if it loses its peg. Since it's supposed to be backed by real dollars, holders can redeem them. According to the Tether team, $300 million has already been redeemed directly and it's on track to process a whopping $2 billion so far.

These redemptions are perhaps calming panic and restoring confidence to Tether. As I write, its price has climbed back to within 1% of $1. And the crypto community is certainly breathing a collective sigh of relief. The crypto market is rife with leverage -- something I don't recommend using for investing in stocks or cryptocurrencies. If Tether falls like TerraUSD, it could set off a chain reaction of margin calls to the detriment of the entire space.

Many have questioned Tether's reserves in the past and predicted a doomsday scenario if what's happening today actually happened. So far, Tether is mostly holding up against the extreme market volatility. But it looks like the situation is far from over. Therefore, cryptocurrency investors should be watching for further developments with extreme interest. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Days after TerraUSD's shocking fall, Rival Tether is suddenly teetering appeared first on The Motley Fool Australia.

• Stablecoins are different from other cryptocurrencies
• They're backed by another asset, often a more traditional one
• Stablecoins are far less susceptible to market moves due to their backing
• Investors can still earn returns from Stablecoins through various platforms

It's been a tumultuous past few months for cryptocurrency. The market has seen wild fluctuations in value, with Bitcoin (CRYPTO: BTC) and other digital currencies plummeting in price. However, one sub-category of digital currencies has been largely immune to the cryptocurrency bloodbath: Stablecoins.

In this article, we will explore the unique characteristics that set Stablecoins apart from other cryptocurrencies.

What are Stablecoins?

It turns out the wild, wild world of crypto is not completely consumed by volatility. Indeed, even the speculative landscape of cryptocurrency demands a need for stability. Perhaps more so than traditional assets.

The solution… Stablecoins.

Put simply, Stablecoins are cryptocurrency tokens that have been pegged to another asset with a more stable value. To date, most Stablecoins have been backed by either a fiat currency or a cryptocurrency.

In other words, the value fluctuates in tandem with the value of a 'steady' asset. The largest Stablecoins in the world by market capitalisation all use the United States dollar as their reference point.

USD Coin (CRYPTO: USDC), for example, is pegged to the US dollar and each USDC token is supposedly backed by a real-world dollar held in reserve. Other notable examples include Tether (CRYPTO: USDT) and Dai (CRYPTO: DAI).

While many of the above Stablecoins are fiat-backed, there are other options open to investors. For the more decentralised-desiring crypto enthusiasts, Stablecoins also come in crypto-backed and algorithmic forms, removing the link to central banks.

How do they differ from other cryptocurrencies?

The key difference between Stablecoins and other forms of cryptocurrency is that they are not beholden to the whims of the market.

Their stability makes them attractive to many cryptocurrency advocates, as they can safely store their money in Stablecoins without fear that their value will fluctuate significantly. But they still offer most of the benefits associated with cryptocurrency.

While the removal of the downside risk is appealing, keep in mind the upside is no longer present. However, crypto users can take advantage of attractive yields offered on Stablecoins across various platforms at their discretion.

Unlike traditional cryptocurrencies, this is one of the only ways to accrue returns while holding the token.

The post What are Stablecoins and how do they differ from other cryptocurrencies? appeared first on The Motley Fool Australia.