In the middle of the Cryptocurrency industry meltdown in 2019, Bitcoin experienced a loss of more than 3-quarters of its value. This created a queue for enthusiasts to shift to so-called “stable” coins, which are deemed the utopia in the world of Cryptocurrencies. Let’s take a close look at stable coins:
To be able to be considered as a stable coin, it should not be the only asset on its own, it must represent another entity that is another asset, like cash or petroleum. While a traditional digital currency like Bitcoin is so unstable, stable coins are more like traditional cash, it’s usually valued at a constant price.
Currently, these stable coins are being used by new investors to jump into Cryptocurrency investing.
Almost all Cryptocurrency only allow trading one Coin to another type of Coin. The reason behind, is that exchanging traditional money to digital money is not exactly a straightforward process, it’s usually more complicated than that, the process has to go thru banks, regulations and local laws.
If you are a first timer in the world of Cryptocurrencies, it’s recommended to convert your cash to stable coins using Cryptocurrency exchanges, like Coinbase or Coins.ph for example. Using your stable coins, you may opt to move to bigger exchanges like Binance where you can trade more than a hundred different Cryptocurrencies.
When the time comes that you want or have to opt out of Cryptocurrencies, it is possible to convert them back to stable coins without cashing them out to actual money.
A better alternative?
Advantages of stable coins include being used for daily purchases, such as paying for your food, groceries, fare or commodities, showing greater potential to adoption of the masses compared to the more popular Cryptocurrencies, where transactions usually take a lot of time, and the fees tend to be higher due to changes in value.
In most cases, most stable coins are supported by actual currencies with no difference between their values. Distributors of the coin get exactly the same amount in their accounts.
The top stable coin is Tether, also called USTD, that is distributed by US-based start-up company Tether Limited. Though, when the start-up failed to produce an independent audit, it affected its price that went down to 90 US Cent.
Other stable coins which are also USD supported are: Gemini, TrueUSD, USDC, and Pax, that are distributed by companies regulated by the US government, and the auditing process is more transparent.
(Jet Encila is a journalist, editor and freelance writer from the Philippines).
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