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What Are Stablecoins? How stablecoin prices are stable?

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A stablecoin is a cryptocurrency designed to have low price volatility. Stablecoin prices are stable and are used as stores of value or units of account, as well as in other use cases where volatile cryptocurrencies may be less desirable.

Different stablecoins use different strategies to achieve price stability, some are centralized, others are decentralized.

Since their inception, cryptocurrencies have been considered particularly volatile investment instruments when it comes to their price. That’s led to price jumps and crashes, preventing cryptocurrencies from being used for everyday goods and services in some cases, due to the risks for vendors and merchants.

That’s where stablecoins come in. The theory goes, if you create a currency that is ‘pegged’ or attached to a regular fiat currency like the US dollar or something else with a relatively stable price, it will prevent currency swings.

We explore these more below.

READ more:  A trader states that Ethereum will reach US$10,000 this year

What is a stablecoin?

Stablecoin prices are stable and are used as stores of value or units of account, as well as in other use cases where volatile cryptocurrencies may be less desirable.

Stablecoins are cryptocurrencies that claim to be backed by fiat currencies—dollars, pounds, shekels, rubles, etc.

The idea is that, unlike cryptocurrencies like Bitcoin, stablecoin prices remain steady, in accordance with whichever fiat currency backs them.

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The information expressed in this article is solely those of the author and do not necessarily reflect the vies of CryptoDeFinance.  Each and every investment and trading move involves high risk. You should always conduct your own research when making a decision in crypto investment.
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Bruno Marques

Hi! I am the CEO/Founder of Crypto DeFinance, and I am an Enthusiast crypto investor. I started this project so we can provide you with carefully curated news. If you like us and our news, share the posts and comment. Your visit and interaction is very important to us.
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