During the bear markets, 3 coins among the top 6 hang in there and have their prices stable.
Well, so far stable.
Here are the stablecoins story you need to know:
Stable assets could be gold or the US dollar.
This peg helps to stabilize the price of the coin and reduce volatility.
Currently, 3 of the top 6 cryptocurrencies by market cap are stablecoins.
https://coinmarketcap.com/ ——maybe Mariel can make a ranking image of top6?
Like Tether (USDT) is backed by U.S. dollars.
But they are also the most controversial.
No guarantee that the issuer will actually have the money to back the stablecoin.
Wrapped Bitcoin (WBTC) is a stablecoin backed by Bitcoin.
However, crypto-backed stablecoin usually has an extra layer of protection to eliminate the volatility of cryptocurrency.
Algorithmic stablecoins are backed by a mathematical formula, which is designed to control the supply.
To keep the price stable, an automatized system will increase or decrease the supply of stablecoins.
TerraUSD (UST), is an algorithmic stablecoin that was supposed to be pegged to the U.S. dollar.
They are backed by very stable assets, like gold and silver.
But they are not as widely accepted as USD-backed stablecoins.
Digix Gold Token (DGX) is one example.
But no stablecoins are too big to fall.
The transaction fees are relatively low, less than $1.
Stablecoins are also used as a place to store value.
Transferring assets from wallet to bank account takes a couple of days.
The quick transaction of stablecoins to coins allows one’s funds to go into next investment right away.
You can hold some USDC instead of Bitcoins, to reduce your exposure to price swings.
You can convert your fiat currency into a stablecoin to avoid impacts from recession.
The controversy lies in the USD-backed stablecoins is whether issuers actually have that money.
The investigation is ongoing.
Starting from May 9 of 2021, while UST was the 3rd biggest stablecoin by market cap, it lost 99.4% of its value in 10 days.
Every investment comes with risks.
Even they name themselves “stable”!
Be careful and DYOR (Do your own research).