Although the week-long looting and mayhem which brought the rand to its knees are now subsiding, fears that the rand/dollar exchange rate will continue to suffer remain high. Part of the cause for the fear is the disruption of supply chains due to the temporary shutdown of logistics firm Transnet and crude oil refinery Sapref.
This disruption prompted Wall Street bank JPMorgan to reevaluate third quarter quarter-on-quarter growth predictions, concluding that South Africa’s economic growth this year will be 3% lower than initially thought.
Major retail chains are working around the clock to get stores replenished after the looting, and the N3 Durban-Johannesburg highway is open again. But it will take “months and many millions” to get broken supply chains functioning properly again.
Investors who were starting to breathe easier as a result of the rand’s recovery at the beginning of the year are likely now looking for places to put their money where it can weather the road ahead.
Stablecoins and high-interest-earning accounts a solution
Stablecoins might just be that solution. Cryptocurrency stablecoins are coins whose value is backed by a stable underlying asset, such as a fiat currency. When the value of the underlying asset changes, the stablecoin’s value changes commensurately.
Stablecoins offer the best of both worlds to investors — the relative ease and speed of trading in a cryptocurrency, but without the risk of wild fluctuations that non-stablecoins offer.
TrueUSD (TUSD) is a stablecoin pegged entirely to the US dollar with a current market cap of nearly $1.4-billion. TetherUSD (USDT), also pegged by the dollar, has a market cap of over $62-billion.
South African cryptocurrency exchange and prime brokerage Ovex provides high-interest-earning cryptocurrency accounts in both TUSD and USDT. These interest accounts can provide up to 20% annualised interest, which is paid out in the cryptocurrency that was initially deposited.
“Exchanging rands for stablecoins and then putting those coins in a high-interest-earning account is a no-brainer right now,” says Jon Ovadia, founder and CEO of Ovex. “It’s like buying US dollars until the rand improves, but in an account that will give you more interest than any US dollar account ever would.”
OTC and arbitrage services
By holding cryptocurrency instead of a fiat currency, investors can then make use of other crypto-only services.
Ovex offers two additional low-risk cryptocurrency services: a concierge OTC trading desk — with post-trade settlements, margin services and extremely tight spreads — as well as its highly sophisticated and zero-risk arbitrage service, which regularly brings in returns of over 3% for investors.
“Investors don’t need to count on bitcoin’s volatile nature anymore to get returns from it,” says Ovadia. “There are lower-risk methods to earn steady percentages with bitcoin and other coins these days.”
Ovex takes all the risk on arbitrage trades and commits to the price pre-trade so that the investor has no risk involved. “Such arbitrage gains are not possible with US dollars, but they’re possible with cryptocurrency,” says Ovadia. “By converting their rands to a stablecoin, investors can ride the current storm and capitalise on cryptocurrency-specific earnings made possible through arbitrage and OTC trades.”
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