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Stablecoins: what is it and what is its importance in the crypto market?
Cryptocurrencies have had a huge impact on people's lives, allowing them to profit from their unpredictable volatility. However, it can also play against it, representing an investment risk. As a solution, we have the Stablecoins.
But what are stablecoins really? As its name indicates, they are those whose price remains unchanged. Learn more about it in the development of the article.
What are stablecoins?
Mainly, they are presented as a viable option for users to have their money digitally without losing its value.
This is because cryptocurrencies constantly tend to change in price, largely influenced by speculation.
The difference is that the value of these remains anchored to that of a traditional currency, thus combating the volatility of cryptos. There is also the case that its price is fixed to that of a physical asset, such as gold.
It means that as long as the value or funds to which the stablecoin is pegged remain stable, so will its price.
One of the main examples is the USDT, known as the Tether dollar, whose value is pegged to the US dollar.
In this sense, thanks to the stability of the US dollar, Tether has remained at a round, stable, and fixed price over time.
However, it is important to note that it is not a speculative currency, which means that you will not generate income from it.
Stablecoins as an alternative
If we needed a word to define cryptocurrencies, anyone would agree on their volatility.
And it is that, with just a message, a statement or comment from an influential person, it is enough for the price of a currency to be altered.
What better example than that of Elon Musk, and his fondness for Dogecoin, or a more recent Shiba Inu. On repeated occasions, with messages through Twitter, he has shown support for cryptos, being reason enough for people to invest in them.
But what about stablecoins? That its value in the market is not influenced by the speculative factor or the investor's fear.
Therefore, they are presented as alternatives for people who want to keep their funds in digital currencies, thus adapting to new trends.
The advantage is that today there are a large number of exchanges that make the conversion possible. One of the main ones is Binance.
In this way, you would be joining the cryptocurrency market, avoiding the great risk that exists of losing your money.
What are the benefits they bring?
Although it does not allow us to generate income after obtaining it, its benefits translate into extensive utility.
Since digital currencies and exchanges have emerged as a new trend, they have been implemented as a payment method in many businesses. In turn, there are people who adopt them for their daily transactions.
Therefore, they will be able to use such cryptocurrencies as exchange currencies, thus taking advantage of their stable value over time. Everything, without the strict need to use our bank account, which can carry commissions.
On the other hand, we also have the great advantage that we can convert it to another currency, avoiding the commission rates charged for the conversion.
Likewise, stablecoins are used to deal with inflation and economic problems that a country is going through.
In other words, people convert their local currency to a stable cryptocurrency to prevent their money from being devalued by inflation. One of the most notorious cases is that of Venezuela, whose economic situation is old news.
What we must take into account
Although they are presented as the solution to economic and inflationary problems, the reality is that their concept is basically the same. The difference is that you will have your money digitally.
Indeed, although they may remain stable over time, the reality is that their value changes as a result of inflation. This means that one US dollar in 1950 is still the same as the one in 2022.
The difference is in the number of services or products you can buy with a single dollar. And, at that point, the value of the crypto stablecoin is also affected, since it is anchored to the conventional currency.
