As ether and fellow altcoins tank because of bitcoin’s fall to a five-month low of $38,000, all eyes are on stable coins. The curse of high volatility has once again rattled the market prompting investors to look at alternatives. And stable coins seem to fit in just right.
Stable coins are cryptocurrencies. In fact, it is a twisted cocktail of traditional (fiat) asset stability with the flexibility of a digital asset. Cryptocurrencies are notoriously volatile like bitcoin and ether, and altcoins – Cardano, BNB, Solana, XRP, Polkadot and Avalanche etc.
A typical cryptocurrency is decentralized, meaning that it is free of central monetary authority like governments and banks. Cryptocurrencies are created on the blockchain whereby people can buy, sell or trade them securely. But the downside of crypto is its high volatility. As such, investors, especially the inexperienced ones can end up losing millions or billions of dollars if they are not guided properly.
Stable coins are a class of cryptocurrencies that are pegged or interconnected to the value of a stable asset like the US dollar or gold. Binance (BUSD), USD Coin (USDC) and Tether (USDT) are examples of stable coins. These stable coins are all backed up the US dollar. It offers the same value to investors and traders as the fiat currency offers stability to people in the traditional markets. Stable coins allow investors to stay in the crypto market allowing them to move faster between trades without having to wait for days. Stable coins bring more liquidity.
It encourages more investors to take up stable coins.
