Putting your stablecoins to work in 2022

Putting your stablecoins to work in 2022

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Mike
Mike

An editor at Coincrop


22 Feb 2022 | 5 min read
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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:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

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).

OrganizationSymbolRankMarket capitalization
TetherUSDT3$79 billion
USD CoinUSDC5$53 billion
Binance USDBUSD13$18 billion
TerraUSDUST15$12 billion
DaiDAI19$10 billion
FraxFRAX51$3 billion
TrueUSDTUSD77$1 billion
Frax ShareFXS78$1 billion

Where can I purchase stablecoins?

OrganizationProductsWebsiteRating
Abra10https://abra.com
Blockchain.com16https://blockchain.com
Crypto.com127https://crypto.com
CoinJar0https://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

Mike

An editor at Coincrop
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