Are you afraid of investing in crypto? Most investors feel it is not easy to invest in cryptocurrency just because they are afraid of bearing a loss in case of a sudden market dip. Due to this reason, they are always wondering if the crypto value remains stable under every condition. So, the “Stablecoin” crypto comes into the concept. Well, a stablecoin is a crypto coin whose value remains the same and there is no risk of market volatility. To know more about this fascinating and exciting cryptocurrency, I encouraged you to stay tightly bound with this article. So, there's no time to waste, let's start now.
What's the Point of Stablecoins? Understanding Why They Exist
Stablecoin is a type of cryptocurrency and as it is represented by the name "Stable" means it maintains stability whatever the market situation is. It is a special kind of cryptocurrency whose purpose is to remain the same regardless of the ups and downs going into the crypto market. The idea is opposed to the currency that is easy to use and exchange, but the value remains the same, unlike regular cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and others the crypto market is highly volatile and these currencies change their market value time by time. Due to the volatile nature of these cryptocurrencies, investors may have to bear a big loss. So here, in the stablecoins, there will be no risk of market dip, because its market will always remain the same.
Stablecoins are of various types such as Fiat Backed, Crypto Backed, Algorithmic, Commodity Backed, and Asset Backed Multi Collateral.
The most commonly used stablecoins are Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), TerraUSD (UST), Stably Dollar (USDS), TrueUSD (TUSD), Paxos Standard (PAX), Gemini Dollar (GUSD) and HUSD (HUSD)
Now the question arises why do they exist? What’s the reason behind their existence? So, here is the key reason for their existence such as to:
Minimize Volatility: As we discussed in the above section stablecoins is used to retain the value the same and to overcome the risks of market volatility. Market volatility is a severe condition in the crypto market because if the sudden rise can give you a lavish return then definitely in case of a sudden dip it gives you a big loss.
Earn Interest: By using stablecoins users can earn interest by using various ways such as staking, yield farming, saving accounts lending, and borrowing.
Trade or Save Assets: Stablecoins facilitate the traders to trade for it directly on the crypto exchanges without converting the traditional currencies to cryptocurrencies back and forth. This helps the traders to perform efficient and cheap transactions as well as also eliminates the risk associated with the exchanges.
Send Internationally: It is helpful for those who want to send money out of the border without the involvement of banks and intermediaries. Stablecoins facilitate users in cross-border transactions easily and efficiently.
Conclusion
In conclusion, Stablecoins is designed for those investors who really don't want to take the risk of market volatility. These coins are designed to maintain their price over time so that’s the reason there is no risk of a market dip. Furthermore, it ensures user privacy and security. Stablecoin supports the smart contract and is being widely used on DeFi - Decentralized Finance Exchanges. With the help of Stablecoins, you can easily transfer money out of the border without involving traditional payment methods like banks and others.
