Putting your stablecoins to work in 2022
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tablecoins join the world of fiat and crypto currencies together as prices are linked to reserve assets such as gold or the US dollar. They are a popular way to trade and store value.
In this guide:
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What are stablecoins?
Stablecoins are a category of cryptocurrencies that seek to offer price stability when compared to cryptocurrencies such as Bitcoin.
The value of a stablecoin is attached to the value of a “stable
For example, Tether ($USDT), USD Coin ($USDC) and Binance USD ($BUSD) are all backed on a one-to-one basis with the US dollar. I.e. one USDC, USDT or BUSD is the same as one US dollar.
Why are stablecoins important?
There are 3 important functions of stablecoins:
1. Increased volume and liquidity to the crypto market
The efficient and stable natures of stablecoins creates confidence in the crypto market. More people will be assured when dealing with the market if they know they can move in and out of stablecoins. This brings more liquidity with makes the entire market more efficient. This increased efficiency brings about more accurate asset pricing with better asset prices.
2. Stability in a volatile market
We can compare the value that stablecoins bring to the crypto market as being similar to the value brought by fiat currency in traditional financial markets – stability. For example, investors in traditional markets might allocate some of their portfolio to cash when volatility increases – in a similar way, crypto investors can move to stablecoins.
3. An efficient medium for moving fast in the crypto market
In the event of a volatile market, crypto investors can use stablecoins to make trades quickly without having to wait hours (or days) for fiat money to be transferred.
How can stablecoins be used?
We can consider 3 main ways in which stablecoins can be used:
1. Limit volatility
Risk-adverse traders can hold these stablecoins in times of market volatility. Once the trader thinks the bear market period is coming to an end, they can they move back into traditional cryptocurrencies.
2. Earn interest from savings
Through a variety of methods, it is possible to earn interest from your stablecoins. By lending your stablecoins, it is possible to earn interest payments from borrowers.
3. Easily and rapidly transfer assets
Bank accounts are not needed in order to hold stablecoins. It’s possible to transfer these tokens with low transaction fees and fast processing (when compared to traditional fiat money).
What are the most popular stablecoins?
| Organization | Symbol | Rank | Market capitalization |
|---|---|---|---|
 Tether | USDT | 3 | $79 billion |
 USD Coin | USDC | 5 | $53 billion |
 Binance USD | BUSD | 13 | $18 billion |
 TerraUSD | UST | 15 | $12 billion |
 Dai | DAI | 19 | $10 billion |
 Frax | FRAX | 51 | $3 billion |
 TrueUSD | TUSD | 77 | $1 billion |
 Frax Share | FXS | 78 | $1 billion |
Where can I purchase stablecoins?
| Organization | Products | Website | Rating |
|---|---|---|---|
| Abra | 10 | https://abra.com | |
| Blockchain.com | 16 | https://blockchain.com | |
| Crypto.com | 127 | https://crypto.com | |
| CoinJar | 0 | https://coinjar.com |
Summary
Stablecoins are a crucial component of the crypto ecosystem. They provide a reliable and safe means of exchange of both investors and traders. There role is particularly important during downturns when the crypto market is bearish.
Mike
An editor at CoincropRelated Articles
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