The introduction of cryptocurrency in the market has digitalized the process of transactions between organizations across the globe. However, ordinary people seem to trust a cryptocurrency like Bitcoin less than rich people because of the volatile nature of its price.

This is where stablecoins kick in. Stablecoins acts like a bridge between the worlds of modern cryptocurrency and the traditional flat currency used in everyday life because the price of the stablecoin is pegged to some reserve asset having a constant value like the U.S. dollar or gold.

Definition of stablecoin
Stablecoin is the digital currency that links the crypto world and the fiat currency world. The price of the stablecoin digital currency is relatively more stable than the cryptocurrencies like Bitcoin. The perfect stablecoins definition is, “Stablecoin is a form of digital currency pegged to some stable reserve asset like gold or the U.S. dollar so that the price would not fluctuate much easily and frequently.”

Using stablecoin decreases the volatility of the price fluctuation dramatically, and as a result, an everyday transaction in the e-commerce market is smoothened. The stability of the traditional asset price and the flexibility of modern digital currencies like Bitcoin have been brought together through the invention of the stablecoin. The idea has proven to be very popular and has also been accepted by people from different sectors of the e-commerce market. The stablecoins like USD Coins have drawn billions of investors because of the stability provided by the stablecoin.

What are stablecoins
Importance of stablecoin
To understand the importance of stablecoin, you need to understand what is a stablecoin first. Bitcoin is currently the most popular cryptocurrency present in the world. The price of one Bitcoin is also increasing gradually. However, the speculation of the seller and the buyer who invest their money in Bitcoin has always remained high and will continue to be the same in the future.

The price of Bitcoin rose from $5,000 in March month of 2020 to something around $63,000 in April 2022. The increase in its price in a short period of only one year shows its volatility. Not only does the price increase rapidly, but the decrease can also be very fast.

So, the stability provided by stablecoin is beneficial to investors. As the name stablecoin suggests, the main objective of the coin is to draw investors towards the digital currency world and invest in stablecoin

by offering them stability in the price of the digital currency they are investing in. The importance of the stablecoin is supported by some other features like

Any country does not own stablecoins. They are globally accessible to every person active in the online world. So, investors need to know what are stablecoins.
The stablecoin is fast to transmit. The price of transmission is also lower. The security of the stablecoin is also top-notch.
As they are native to the internet, they are programmable and can be reprogrammed according to the market’s needs.
Use of stablecoin
Once a person gets to know about stablecoin and how stablecoin works, then the different uses of stablecoin can be visible clearly to the investor, and they can be benefited immensely. Some of the best services of the stablecoin are:

Offers less volatility
The fluctuation of the price of this digital currency is far lower than that of cryptocurrencies like Bitcoin and Ether. Cryptocurrencies can significantly change by 10 per cent in currency value in minutes. However, the stablecoin is pegged to a reserve asset which provides some assurance to the investors regarding their future.

Trade your assets easily around the globe
Like cryptocurrencies, stablecoins can also be transferred to different accounts across the globe very quickly. The stablecoins can be moved easily to distant places or countries where the U.S. dollar is also hard to find. This helps traders from far corners of the world to connect with others and gain profit from their business. Stablecoin also helps people where the national currency is quite unstable. The people of that country can invest their money in the stablecoin as it will not fluctuate shortly.

More interest for your deposits
Money invested in the stablecoin helps to gain more interest. The stablecoin investment offers more interest than what a typical bank would provide for the acquisition of the same amount of money.

Cheaper money transfer
The money transfer through stablecoin is much cheaper than the transfer of traditional currency. A transfer of a million dollars would cost you less than a dollar as the transfer fees.

What are stablecoins
International transactions
The money transaction is faster and cheaper, making the transaction using stablecoin one of the most preferred ways of business transactions across the globe. You can send your money to any country or place worldwide at a cheaper transaction fee.

Conclusion
Although cryptocurrencies like Bitcoin offer more excellent value on the investment of every person, the investor remains sceptical about price fluctuation. Stablecoin is a solution to the problem as it has a more stable price than cryptocurrencies.

Posted Date: July 11, 2023