Stablecoins are a segment of Cryptocurrency that is getting increasingly popular with the passage of time. As it is a part of Cryptocurrency and follows the rules and conventions of fiat currency. There are certain advantages that really create a difference from other Cryptocurrencies. This is the reason people are banking on this group of Cryptocurrencies.
Have you started trading Stablecoins? Maybe you are a new investor. The time is good for investment as the global economy rises from the stagnant pool of the COVID-19 pandemic. Use the immediate edge to reap the benefits. The USP is financial benefits coupled with stability. No matter why the currency got the name Stablecoins. Â
Things To Know About Stablecoins
One must have a thorough knowledge of anything new before making any kind of investment. This is the same for Stablecoins. Let’s get to know certain things that add to your knowledge on this.
1. They Are Backed By Collaterals
Stablecoins are Cryptocurrencies. But the most striking thing with this Cryptocurrency is that it is equated with fiat currencies like the US dollar. These currencies are actually pegged to the price of USD. It denotes it will follow the rise and fall of the USD to determine its value. Popular examples include Tether, USDcoins and Gemini dollars.
2. Stablecoins Are Less Volatile
There is an allegation with Cryptocurrencies like Bitcoin. Cryptocurrencies are extremely volatile. It is like you are sitting on the mountain of success in the morning and can reduce substantially by the end of the night. Such is the volatility and risk associated with it.
Because the Stablecoins are backed by fiat currency that follows the government’s monetary policy, the volatility is less. This is a great advantage that you have with Stablecoins. But it doesn’t mean Stablecoin does not carry risk and uncertainty.
For example, malicious elements might hack your exchange or wallet. If this happens, you will not be able to recover your assets. Once you lose your Stablecoins, there is no mechanism for getting them back like the traditional banks that are under the indirect watchdog of the country.
3. Look At The Stablecoin That Is Transparent And Audited
There is an allegation with Stablecoin of non-conformity to fair and transparent practices. Examples may be cited from Tether. There were not enough reserves with Tether while they were doing business.
It was found through an investigation by the Newyork Attorney General that Cryptocurrency (Tether) was operating in the market with only 74% backed by reserves.
If Tether finds itself under some exigency, will it be able to safeguard itself and the investor’s investments? Probably not. Therefore we advise you to look at the Stablecoin that is transparent and audited.
4. Useful For Transfer Of Money
The economy of different countries of the world, especially some parts of Asia and Africa, depend largely on remissions (income from foreign money). The banking infrastructure might not be that strong in the countries mentioned. In that case, they might not be able to reap the benefits of traditional banking infrastructure.
Now let’s come to Cryptocurrency. Bitcoin is relatively slow, and Ethereum may have some high fees. With Stablecoins, they can send money more conveniently compared to traditional banking systems.
5. You Can Earn Interest With Stablecoins
Among the advantages of Stablecoins, this is one of them. With Stablecoins, you can earn much higher rates of interest. This is much more compared to your bank account (savings bank account).
There are some of the Top Cryptocurrency exchanges that pay high-interest rates- from 5% to 10%. So chances remain that you earn high interest with the Stablecoins.
So when investing in Stablecoins, make sure that you trade with some exchanges that strike a harmonious balance between safety, stability and high interests.
Wrapping It Up
In order to wrap up the discussion, it can be said that Stablecoins offer many advantages to you. There are certain advantages that you have with Stablecoins, along with the disadvantages, but the main thing that you need to consider is the benefits. When investors are looking for an abode of stability in the world of business, they can look at Stablecoin.