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Author: Admin | 2025-04-28
It’s no secret that volatility and cryptocurrency come hand in hand. But there’s one type of crypto specifically designed to offer a steady price: stablecoins.A stablecoin is a cryptocurrency whose value is pegged to the price of another asset, hence the term “stable.” For example, if functioning correctly, a stablecoin pegged to the US dollar or the Australian dollar should always be valued at $1 of their respective currencies.Recent events have highlighted that not all stablecoins are as stable as they claim. For instance, in May 2022, the value of TerraUSD collapsed, showing that not every stablecoin can guarantee a constant price.Here’s a general guide to understanding the different stablecoins available on the market today. Stablecoins are a special type of cryptocurrency designed to have a constant value over time, rather than fluctuating wildly like many other cryptos. They achieve this by tying their value to another more stable asset, like the US dollar. They aim to offer all the benefits of crypto while attempting to avoid rampant volatility.Crypto’s total market capitalisation can rise and fall by billions of dollars a day. Even the top cryptocurrency—Bitcoin (BTC)—is subject to significant fluctuations in value. Over the past month, investors have seen around a 4% daily change in the value of BTC.Fiat currencies, such as the US dollar or the Australian dollar, don’t experience this level of price volatility. So another way to think about stablecoins is as a tokenised version of a fiat currency. Theoretically, a US dollar-based stablecoin is a token that will reside on a blockchain and always trade for one USD. Types of Stablecoins Stablecoins are typically pegged to a currency or a commodity like gold, and they use different mechanisms to maintain their price peg. The two most common methods are to maintain a pool of reserve
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