On the 28th of May, Capricorn host an offline meetup in Viva Shopping Mall in a topic of the collapse of UST and Depg of USDT to discuss the challenge and opportunities of stablecoin. Capricorn officially signed partnership agreement with MQ Technology during the event.
Deto Nick Ng, Chairman of CEA, attended the event and address the opening. “Since the debut of Blockchain, we have been witnessing the change and infinity opportunity of this cutting-edge technology. The stablecoin, especially, has been widely discussed within the commercial sector on how it can empower the traditional industry.”
“We, Capricorn protocol, are adopting a more convenient way by providing more convenient channels for enterprise financing in an efficient and safer way and integrate with the diversified assets using blockchain technology to fill in the gap.” Responded by Bryan Teh, CEO of Capricorn.
During the meetup, Capricorn and MQ Technology have intimated their intend to work together to maximise the benefits for mutual interests in setting up a strategic partnership and to provide the foundation and structure to accelerate vital progress in their industries.
During the panel discussion, Capricorn had a lively discussion with the guests on the recent events on the stablecoin market. The following are some of Capricorn’s views:
It now appears that the continuous blood loss of Anchor, Terra’s important fixed benefit savings protocol, is a harbinger of UST collapse.
The reason why LUNA can grow to the current scale is largely due to the fixed savings rate agreement, Anchor, in its ecology, which provides UST with a fixed annualized income of about 20%, flooding millions of dollars in every day. However, these millions of dollars mainly come from the subsidy of the project and the capital behind it, which is actually continuous blood loss. Also because of this, in order to stabilize people’s expectations, the project announced the purchase of $3 billion in bitcoin at the end of the month, which further aggravated the instability.
The use of BTC as a reserve destroys the reflexivity of the Terra system, which means that the market has added 3 billion UST circulation at the same time. This huge amount of UST value is tied to BTC. With the bear market causing BTC prices to drop, its support to 3 billion UST lost, leaving the system insolvent. As a result, UST had a slight de-anchor at the beginning, and the continued decline of the market intensified the run on UST, triggering a chain reaction.
It can be said that Terra has been lying in the grave since the moment the market value of LUNA fell below the total market value of UST on May 9.
For the impact triggered by this event, Capricorn believes there are two aspects.
Further prove the concept of the development of collateralized stablecoins
Users are smarter when choosing stablecoin assets or stablecoin projects. Capricorn believes that this is a good opportunity for stablecoins like collateral. Through the mechanism design of Capricorn, the company can ensure that CUSD is backed by sufficient collateral with actual value, so as to build users’ confidence in CUSD. A reasonable mechanism, sufficient collateral, and user confidence are the most important moats for any stablecoin project. On this basis, with the development of Capricorn, CUSD will have better credit, the assets behind CUSD will have higher capital utilization efficiency, and the funds participating in Capricorn will get higher returns.
This turmoil will inevitably attract regulatory attention, although it will not come so soon. Regulation will raise the entry threshold of the stablecoin industry, and put forward higher requirements on the team’s ability to comply with regulations. This is precisely the opportunity for the Capricorn team. The team has rich experience in the banking industry and members who are familiar with financial and legal affairs, and have strong compliance capabilities. It can be said that Capricornis well prepared for the development of stablecoins in the next stage of the regulatory environment.
The Challenges and Opportunities of the Stablecoin Market
First of all, to drive blockchain asset to the mainstream market, a stable currency is needed for the transactions and payments. Although Bitcoin and Ethereum are convenient in terms of transfer payments, the fees are also cheaper, and they can lead to the world, but for ordinary users, a major problem is that Bitcoin is too volatile for asset preservation. It is not convenient to use the payment scene.
“At the same time, with the rapid growth of the scale of blockchain assets and the number of users, the market demand for stablecoins has also been becoming larger and larger. According to the data from Coinmarketcap. The current total market value of virtual currencies is about 1.2 trillion US dollars, and it will continue to grow in the future, which ensures the expansion of stable currency demand. Considering that the market value of real-world economies is hundreds of times that of virtual currencies, even if a small part of these assets are converted into blockchain assets, it will bring a further huge increase in the demand for stablecoins.”said Vincent Cheung from Bitbox, ”If Bitcoin opened the era of encryption, and stablecoins will be pushed to the prosperity of encryption, and this prosperity will also include today’s huge real-world assets, which is a true value Internet revolution.”
“Of course, everything is not easy. It takes time to happen. During this period, we will face many challenges. For example, the market needs time to verify the mechanism of Capricorn, build confidence in Capricorn, and higher Barriers to entry, stricter regulation.” Said Bryan Teh from Capricorn, “but even with all the visible and unseen difficulties of the track, someone has to start the race. In the past few years, we have seen the rise and widespread use of stablecoins such as USDT, USDC, DAI, and FRAX, and we have also seen players such as UST, AMPL, BASIS, and ESD who have fallen on this path. With so many successful experiences or failures for us to learn from, and the advantages of our team’s experience and resources in the fields of finance, law, and compliance, I believe that Capricorn can successfully occupy a place in this track.”
“Under the COVID-19 epidemic, the vulnerability of enterprises is further revealed, facing of shortage of funds, encountering the problem of high financing threshold. After completing all the credit assessment processes, the time for financing applications is too long that the enterprises are often unable to get immediate help.” Said Terrence Cheah, Executive Director of MQ Technology, “the partnership with Capricorn definitely offers us more choice by using its lending protocol, which takes the traditional financial assets on the chain as value support and operation medium through NFT technology and giving full play to its own advantages and empower traditional businesses.”
“This is a new era for our generation, same as the internet era. We are glad to see a wide discussion on the blockchainization are raised among the general public.” Said Vincent from Bitbox, “as an blockchain incubator rooted in Malaysia, we are making every effort to make every possible happened.”