Why Do You Need Stablecoins And How You Can Get Them
Cryptocurrencies have existed for a few years now, and they have become a significant investment asset. While they have proven to be very lucrative for many, the volatility of the market and the vast sums of money involved has kept many investors away. However, if you can stomach the risks, you will be rewarded handsomely. In addition, stablecoins have increased access to the market for those who have less appetite for risk. But what are these stablecoins, and where can you trade them?
What Is A Stablecoin?
In the digital, fiat-based economy, the value of a currency is determined by how much people are willing to pay for it. For a currency to maintain its worth, the people who use it must be confident that it will retain its worth in the future. There's also a concern about volatility and how it can affect businesses and consumers. For this reason, stablecoins have been developed as an alternative to traditional currencies that use more volatile and less predictable mechanisms such as market forces and speculation. Certain stablecoins like USDT and USDC are pegged to the US dollar, and their primary goal is to maintain a consistent value to reduce the volatility in the market. This makes them safer and more reliable for everyday transactions. In essence, stablecoins aim to reduce volatility in the cryptocurrency market.
Why Do You Need Stablecoin?
The answer to this question is pretty straightforward. In a world where cryptocurrencies fluctuate as often as the weather, it's only wise to have a safety net. It is convenient to have stablecoins on hand whenever you need to convert from one token to another or use them as a payment method on platforms that do not accept other cryptocurrencies.
They Are Useful In A World Of Volatility
There is no central bank or government backing cryptocurrency. Consequently, the value of cryptocurrencies is determined by what people are willing to pay for them. There can be significant volatility in cryptocurrency prices, which makes it challenging to assess their value. Stablecoins are tokens pegged to the value of fiat currencies and tend to hold their value against other cryptocurrencies. Their prices remain solid as they are backed by assets with stable prices, like gold or US dollars. These coins act as a hedge for people who want to invest in cryptocurrencies without taking the risk of price volatility. Stablecoins can be traded at any time or used as a store of value, much like holding money in USD.
They Are More Useful For Purchasing Things
Since stablecoins are pegged to a stable asset, they are less prone to price fluctuations. This stability means they are considered more beneficial for buying things instead of holding. In an interesting recent trend, traders have been using stablecoins to trade on exchanges where they cannot access their fiat currency.
An Alternative To Trading With Fiat Currency
As previously mentioned, the idea of stablecoins is to create a digital currency that is pegged to a stable asset. Stablecoins should, therefore, always have the same price. This way, people can trade in and out of digital currencies without fear of losing their value anytime soon.
How Do You Get This Type Of Cryptocurrency?
Most crypto exchanges offer these types of tokens; you should be fine if you have an account and your exchange sells the stablecoin you want. Generally, the most prominent platforms will offer these for trade, and due to their increasing popularity, smaller ones will likely provide them as well.
What Are The Best Stablecoins?
The most popular stablecoin is Tether, which has been around for quite some time now and offers investors an alternative to Bitcoin and a shield against heavy price movements in other digital assets such as Ethereum and Bitcoin Cash. Other popular stablecoins include:
- Tether: Tether is a cryptocurrency that is backed by one dollar for each token issued.
- USD Coin: This option uses the same technology behind Etherium and is also backed by fiat.
- Binance USD: BUSD is a stablecoin created by Binance, the largest cryptocurrency exchange in the world. Backed by fiat.
- Dai: The Dai stablecoin is backed by a smart contract on the Ethereum blockchain.
- TrueUSD: A stablecoin is a cryptocurrency that has low volatility against the US Dollar. TrueUSD is one of the more popular stablecoins in the market. It is designed with two key features in mind, transparency, and trustless custody.
- HUSD: HUSD is a stablecoin also pegged to the US dollar (starting to see a trend yet!).
Stablecoins are a great idea. They have an ever-increasing market cap, and they have been adopted by some of the biggest exchanges in the world. They derive their value from their inherent stability, and every trader should have some as part of their portfolio.