Gemini Dollar (GUSD) vs. Paxos Standard (PAX)

On Monday (10 September 2018), two regulated price-stable cryptocurrencies (stablecoins) were launched: Gemini dollar (GUSD) and Paxos Standard (PAX). Here, we examine the similarities and differences between these two new cryptocurrencies.

What GUSD and PAX Have in Common

Both of these are:

  • the world's first-ever regulated stablecoins, approved and regulated by the New York State Department of Financial Services (NYDFS);
  • subject to the stringent requirements of the NYDFS, which means, for example, that Gemini and Paxos must
    • "implement, monitor and update effective risk-based controls and appropriate BSA/AML and OFAC controls";
    •  "implement, monitor and update effective risk-based controls to prevent and respond to any potential or actual wrongful use of stablecoin, including but not limited to its use in illegal activity, market manipulation, or other similar misconduct";
    •  warn consumers "that any stablecoin and/or the fiat currency available upon redemption of any stablecoin may be forfeited if the stablecoin has been, or is being used for, illegal activity";
    • warn consumers "that any stablecoin may be subject to forfeiture to, or seizure by, a law enforcement agency in the event that there is a legal order or other legal process";
    • warn consumers that "any stablecoin or fiat currency available upon exchange of stablecoin that has been subject to freezing, forfeiture to or seizure by a law enforcement agency, and/or subject to any similar limitation on its use, may be wholly and permanently unrecoverable and unusable and may, in appropriate circumstances, be destroyed"
  • issued by companies that received limited purpose trust company charters from NYDFS in 2015;
  • fully collateralized 1:1 by the U.S. dollar (in FDIC-insured U.S. bank accounts), which means the number of such tokens in circulation will always exactly match the number of dollars in reserve, with USD balances audited (externally) on a monthly basis;
  • built on the Ethereum blockchain (designed as Ethereum tokens written according to the ERC-20 standard), which means they can be stored in any Ethereum wallet;
  • useful for hedging against the volatility of other cryptoassets, for settling transactions outside of banking hours, or for eliminating cross-border transaction fees; 
  • happy to let the public view the smart contract code;
  • competing with each other, rather than with the highly controversial Tether (USDT), which, as an unregulated stablecoin, (unlike these two) has no AML requirements.

How GUSD and PAX Are Different

As far as consumers are concerned, GUSD and PAX are much more similar than they are different. Here are the very few differences that do exist:

  • The PAX ERC-20 contract code is available for technical review at
  • Thanks to a report by MarketWatch, we know Gemini keeps its USD deposits at State Street Bank, but all we know about Paxos and its USD deposits, according to an interview the Paxos CEO gave to Forbes, is that they are held by "four separate U.S.-domiciled banking partners."
  • Gemini's USD deposit balances are audited monthly by BPM, one of the largest California-based accounting and consulting firms in the U.S., while in the case of Paxos, the external monthly audits are carried out by Withum, a nationally ranked Top 25 auditing firm.

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Weekly Newsletter

Bitcoin Dominance Bump Unlikely to Last — Market Analysis

The entire crypto market seems to be going risk-off and turning to a state of correction, after an excellent start to 2020 throughout January and February which saw significant gains. This is reflected in the brief pop in Bitcoin market dominance. But in the longer term, it’s a different story, and we must always bear in mind the intercourse the conflicting trends of different timeframes – and how they can still agree with each other.

Here, rather than focusing on any specific crypto, we’ll look at the market as a whole using some trusted indicators.

We first look at a small-to-medium-timeframe chart of Bitcoin plus Bitcoin’s market dominance arrayed against the “Others” market dominance, Others being a basket of all altcoins below the top 10. This panoply of charts gives us a broad insight into the whole market.

just some speedbumpsBTC chart by TradingView

During January and some of February, we can see clear risk-taking in the form of a rising altcoin market share. Bitcoin’s price was rising even as its dominance was falling: peak altcoin conditions, where so much buying is coming into the system that more entities are buying Bitcoin than selling Bitcoin for altcoins, even when there is a lot of that.

This pattern has reversed in the past few days, with Bitcoin’s price falling even as its dominance rose, with altcoins being sold back into Bitcoin. The market was overheated in the short term, and people are wisely hedging their profits.

But this trend is unlikely to last. Zooming out and looking at a chart of Ethereum/Bitcoin and both dominance charts again (with Ethereum being a general proxy for the altcoin market), we see a different story.

the bigger picture says the opposite thingETH chart by TradingView

There is a lot going on here. First we can note that Ethereum – again, bearing in mind its role as a general proxy for altcoins – has retaken a very important inflection line that it lost during 2019, the dotted line. It is likely, based on this line retaken last week, that Ethereum is starting a long term uptrend against Bitcoin – and that altcoins in general will do the same in the long term.

Moving to the Bitcoin dominance display in the middle panel, we see an agreement of the above thesis. Bitcoin’s dominance has fallen below its own critical level, namely the area near and above 70%, which BTC held for a while during 2019. This level had not been held since 2017, when Bitcoin put in its all-time-high – and it now looks to be trending steadily away from it again.

This trending away will again provide the space for altcoins to grow in market share, and we have already seen the beginning of this trend during 2020. Perhaps what we have seen was only ‘Round One’.

And moving below to the Others dominance, we see that this indicator has, yet again, taken an important level of 6% and is likely trending away from it. This is the same message in reverse: this level was first tickled during the first real altcoin mega-rally, in the beginning of 2017, and stayed above it for years. It was lost for a time in 2019, about the same time Bitcoin retook its level of 70%.

The larger trends are likely moving in the opposite direction than the shorter ones. Bitcoin's price, based on these indicators, is likely to continue rising even as its market share continues to falls. Altcoins, after years of being battered, are likely to continue gaining market share; and in that situation, the pie can only be getting larger overall.

The views and opinions expressed here do not reflect those of and do not constitute financial advice. Always do your own research.

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