Two Prime Blog

FF1 vs BTC vs USDT vs altcoins: comparative analysis

What is FF1 token and how is it better than USDT? than BTC?
What makes it different from other stablecoins and altcoins?

FF1 is a brand new asset class, so these are the logical questions you might ask before it takes a well-deserved spot in your portfolio as a safe and reliable store of value with growth potential.

To help you navigate the turbulent digital asset space, we have prepared a brief comparative analysis of FF1, USDT, BTC and the majority of altcoins, comparing their key features from the investment standpoint: 1) supply, 2) underlying assets, 3) volatility and 4) diversification.

About FF1: In a nutshell, Two Prime’s flagship token FF1 is a stablecoin that can grow. From a fiat investor standpoint, it offers a liquid crypto instrument backed by a diversified allocation with smoother price action than BTC. From a crypto investor standpoint, FF1 combines the safety of a stable coin and the finite supply of a Bitcoin, offering access to a unique store of value. During the 2 months of COVID-19 turmoil, FF1 went from $3.00 to $3.50, proving its potential to preserve and grow wealth even throughout the crisis.

Let’s take a look at the main criteria.

Supply

BTC: finite supply
USDT: infinite supply
Altcoins: infinite supply mostly
FF1: finite supply

What does it mean?
Finite supply in crypto means that there is only a limited number of tokens that can be issued into circulation. A good example of a cryptocurrency with finite supply is Bitcoin: even in case of little demand, its small supply (only 21 million) creates numeral scarcity, making Bitcoin deflationary in the real world. Bitcoin is actively HODLed and that’s what makes its token economics so attractive. With time, BTC will become more rare – and thus more valuable.

This mechanics is opposed to the majority of altcoins and ICO tokens that allow for the infinite number of new tokens to be created when there is demand. So do the majority of stablecoins, including USDT. It creates certain challenges and potential risks to price stability.

In a sense, FF1 replicates the limited supply of BTC. The number of FF1 tokens is limited to exactly 100 million. Once the entire amount is issued, the shortage of tokens compared to the demand will support the growth of price.

Volatility

BTC: highly volatile
USDT: not volatile
Altcoins: highly volatile
FF1: low volatility: a stablecoin that can GROW

What does it mean?
Major criticism of cryptocurrencies as an asset class revolves around them being highly volatile. We’ve seen BTC double up in price and slump severely, with long months of recovery needed to reach half of its previous price. This makes the value of Bitcoin random: what you paid one day will be different the next day.

The perfect example of this is the famous incident with Bitcoin and pizza: in 2018 a Florida man paid 10,000 BTC for two Papa Johns pizzas, which today is worth over 94 million dollars. While this also proves Bitcoin’s radical ability to grow in price, it’s crystal clear that no currency is a suitable means of exchange unless it’s stable in price.

Stablecoins like USDT that made a remarkable entry in 2017, provided a safe haven for investors: instead of trading crypto to fiat and hitting the fiat bridges, investors could now “tether” (yes, even such a verb was invented) to remain in the crypto realm. However, stablecoins do not offer any growth potential: they are a safe measure, not an investment per se, unless you engage yourself in staking, lending, and other options offered by some crypto ecosystems.

Between highly volatile Bitcoin and non-volatile stablecoins is FF1: backed by a basket of assets, its price can’t drop below the threshold while it keeps growing. A Continuous Token Offering (CTO) describes a token distribution mechanism that releases additional tokens into circulation in response to true market demand. As a result, the token economics responds to market interest and drastically reduces volatility. Most importantly, there are no pump and dump mechanisms involved in FF1 growth – that’s why it keeps growing steadily. In other words, FF1 is a stable coin that can grow.

Asset-backing

BTC: not backed
USDT: backed (⅔)
Altcoins: not backed
FF1: backed

What does it mean?
Cryptocurrencies (BTC and all the altcoins that followed) are not asset backed: they are ab-initio stores of value, meaning that they came from nothing and are backed by nothing. Financially speaking, the value of Bitcoin is uncorrelated from its cash flows for the simple reason that there are no endogenous cash flows. Crypto, like gold, is purely market-driven. Since crypto is intrinsically worth nothing, it is worth about anything you want in the markets. The value of Bitcoin is market-driven, market maker driven, exchange driven and ultimately psychologically driven, which is responsible for its high volatility.

Stablecoins are designed to be stable in price by being asset-backed: they are digital wrappers around existing assets. This is not, strictly speaking, new money but rather digital representations of existing money. They do not amount to new monetary creation. We won’t dive into debates around USDT – the most widely used stablecoin – being only partially backed, which has been a hot topic in the industry, but some questions arise. Generally, now there is a trend towards fully backed stablecoins.

When it comes to FF1, it is supported by a fractional reserve of blockchain industry assets. The funds raised via the Continuous Token Offering of FF1 are placed into the treasury, which invests in a well-diversified structured portfolio of cryptocurrencies, deFi lending, and equity instruments. By investing the funds raised into assets that return cash flows to the FF1 token, our goal is to maintain the token's ability to store true value. Our allocations include BTC, ETH, Uncorrelated Capital (Bain), NGC Ventures, BlockFi, SPiCE VC, and Babel Finance.

At the moment of writing, FF1 is a super-backed asset.

Diversification

BTC: no
USDT: no
Altcoins: no
FF1: yes

When you are buying a cryptocurrency, you are investing in a single asset – this means higher risks in the case of extraordinary market events. Building a diversified portfolio that will improve your returns and hedge risks requires skill and experience: you have to carefully choose assets, and a lot of retail investors make mistakes.

FF1 token solves these challenges for you: backed by a basket of high quality, blockchain-industry assets picked by investment professionals, this brand new asset class gives you the exposure to a risk-managed set of institutional-grade investment opportunities. This enables investors to easily diversify their portfolio by investing in just one asset.

To sum it up

FF1 is a diversified asset-backed token with low volatility and finite supply that brings together the best practices of the crypto world.

Want to learn more about Two Prime and FF1 token?

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