Cryptocurrency has become a popular alternative to the U.S. dollar and any other long-standing currency that existed years before crypto was even a concept. However, crypto is finding itself changing as stablecoins are being introduced among crypto trade and transactions. Keep reading to learn about stablecoins and how they are influencing cryptocurrency as you know it.
What Are Stablecoins?
Stablecoins are forms of cryptocurrency, but they have a twist. Rather than value being placed on them strictly based on various algorithms and blockchains, stablecoins actually tie themselves to another currency or commodity that is already well-established. For instance, one stablecoin could tie itself to oil, as it is a powerful and coveted resource. Another could choose a currency like the U.S. dollar or the euro to base its value on.
What Does This Mean for Regular Crypto?
The existence of stablecoins lends a lot to the expansion of understanding what crypto can be, and proves that there can be a more stable cryptocurrency for the people who do not want to take risks on normal crypto, which, while stable enough, has high volatility and can be quite unpredictable. For instance, if you were to go to an OKX trade spot, you would see a ton of cryptocurrencies for trade as well as their market values in real time. If you look at the trends of regular crypto market fluctuations, you may notice that they vary widely and do not have much of a pattern or set time beyond a loose approximation as to when they will fluctuate in a similar manner again. Meanwhile, stablecoins are predictable as long as you follow the fluctuations of whatever the stablecoin has decided to attach itself to.
This in no way means that stablecoins are infallible or inherently better. It just means that they can be more predictable. However, the unthinkable can happen to any currency, physical or crypto, and the value can plummet out of nowhere.
Will Stablecoins Become the Norm?
It remains to be seen whether stablecoins will become more common than the forms of crypto as we know them. As mentioned before, they have less risk than their other crypto counterparts because they have physical value assigned to them while still being cryptocurrencies. Depending on how the market trends develop between the two cryptocurrency types, stablecoins might have more of an influence in the crypto market and trade in the future, but there is no guarantee. There are too many variables in play at any given moment, and you will not know which crypto will be preferred from one day to the next until it happens.
Stablecoins are a good option to look into if you are looking for a more predictable crypto than most. However, it is also new and unpredictable in its own way. Whatever you decide to do, please make sure that you do your research and determine what you are comfortable with before investigating further in terms of buying and trading. Keep this article in mind as you research, and be sure to keep up with the market trends once you start investing.