Stablecoins (Cryptocurrencies with no/low volatility)

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Imagine yourself to purchase BTC (Bitcoin) at 40k$ then price went to 60k$ and start dropping to reach 58k$. In order to save some of the profit made you should need an exchange which will provide you a stable / low volatility environment until there is the time to buy again. Based on the rule BUY when is low and SELL when is high, there will be sometimes you will need to sell. That is where Stablecoins come in handy. It can provide a way to back up the value with a stable asset without switching to fiat currency.

Stablecoins are useful for investors who want to keep their assets in the crypto environment thus avoiding the excess switching of cryptos to fiat and then back to cryptos which can be expensive and time consuming. Stablecoins gives investors the best of both worlds. Stablecoins are usually linked to another asset with a stable value but also enjoy the algorithmic functionality.

Types of Stablecoins:

• Commodity Backed Coins: Price are backed up by hard assets such as gold or real estate. Most common on is stablecoins in gold.
• Fiat Backed Coins: They are backed by fiat currencies like US Dollar, Chinese Yuan.
• Crypto Backed Coins: Crypto that back other crypto as well. In order to counteract the volitility then backed up is not 1 to 1 ratio as fiat but using for example 1 to 4 ratio.
• Siegniorage style coins: example like Fedcoin (Federal Reserve Coin)

Advantages:

• Easy to acquire: Each platform pushes its own but over all it is easy to have on hand
• Borderless: Stablecoins retain the power of all cryptocurriencies to move without regards to physical borders
• Transactional speed: No need to wait for third party to verify the transfer hence no fees to 3rd party.
• Transparency: Transactions are recorded on a public ledger that can be monitored by anyone unlike fiat currency.

Disadvantages:

• Centralized: Unlike other cryptos are mostly created by centralized organisations that own the currency hence have a stable price.
• Requires 3rd party audits: they are being audited which can be a conflict to a decentralised, trustless or pseudonymous experience.
• Less growth: Can not provide a high ROIs to investors

Read the above are you interested to see which is the best Stablecoins on the Market today? Look no further the next post will answer all your questions.