Home Finance How can stablecoins help crypto investors?

How can stablecoins help crypto investors?

Cryptocurrency has been here for more than a decade now and has been impacting the economy of the world since then. But still, it has not entered conventional or mainstream commerce. The main reason for its exclusion from mainstream commerce is its unpredictability and volatility. Uncontrollable hypothesising usually drives the value of cryptocurrency, visit website

It is not wrong that the investors of cryptocurrency have become millionaires overnight. But a lot of them lost a major section of their earned wealth mere weeks later. Though this sounds thrilling, it is very unfortunate for the ones who experience this. Moreover, it displays the undependable nature of popular cryptocurrencies, bitcoin, for instance. Hence, it is very unreliable when used as a means of payment for goods and services. 

This unpredictability and volatility of cryptocurrencies led to the birth of stablecoins. Stablecoins are created to possess a value that is far more certain than regular cryptocurrencies. It is because they are attached to other assets, for example, the US Dollar or gold. 

The point in launching stablecoins is that a user can experience the advantages of a cryptocurrency without the related utmost volatility and unpredictability. It could help in viewing cryptocurrencies as a practicable way of payments. Ultimately, not all businesses are interested in accepting an unpredictable mode of payment, where the value might drop the very next day. In simple words, if conventional cryptocurrencies act like high-risk stocks, stablecoins are more like withdrawing money from an automated teller machine. 

All these reasons lead to a rise in the demand for stablecoins. The total value of the assets of stablecoins rose by approximately more than 450 per cent in just one year. 

It indicates the impetus leading to the stablecoin invasion, what people call it. There are more than 200 stablecoins around the world currently. Its net market worth is around 130 billion dollars. 

Despite being the claimed solution to the volatility of cryptocurrencies, stablecoins are under close inspection. Even the regulators of the United States and China claim that stablecoins pose a serious threat to the financial systems. 

Precisely, stablecoins seek to imitate the conventional currencies, but in the digital form. A stablecoin is generally a cryptocurrency that is secured by the value of a fundamental asset. The fundamental asset depends on the specific stablecoin in consideration. 

Various stablecoins are fixed at a ratio of 1:1 with some fiat currencies, the US Dollar or the Euro, for instance. In a general sense, currencies can be traded on exchanges. Some stablecoins are also fixed to other types of assets like gold or other precious metals. They can be fixed to other cryptocurrencies as well. 

Now comes the question of why one should use stablecoin. Firstly and most importantly, stablecoins are not reliant on the utmost volatility of prices. This is not the case with other cryptocurrencies. 

Stablecoins grant you all the prospective advantages of cryptocurrencies like liquidity, safety, unchangeableness, and decentralised control. The twist here is that they do not lose the guarantee and stability that are the traits of fiat currencies. 

Investors who are new to the cryptocurrency market use stablecoins as a haven when the market is declining or crashing in the beginning. A user can also convert their bitcoin into stablecoin in a few minutes on a single platform if the price of bitcoin starts falling rapidly. It can save them from great financial losses. 

If this option were not available, the user of cryptocurrency would have had to transfer their capital back to the fiat currency. Moreover, various cryptocurrency exchanges do not usually allow fiat currency on their platform or charge a large fee for the transfer if they do. 

Apart from this, stablecoins are proving their potential in other emerging applications as well. For instance, they could prove advantageous for the industries and individuals who wish to make international payments rapidly with security. It could help everyone, from migrant workers who want to send money to their families to big businesses who want to make their overseas supplies cheaper. Moreover, the use of stablecoins is across the ecosystem of financial services. Stablecoins sound like a step ahead in promoting cryptocurrencies as a payment method.


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