What are Stablecoins? Are They Really “Stable”?

A stablecoin is a form of cryptocurrency whose value is pegged to the value of another currency, asset, or commodity. It is considered private money and is staked to a DeFi (Decentralized Finance) platform. “Pegging” means attaching the value of an asset to another asset, for example, the U.S. dollar. This makes stablecoins solid assets in an up-and-down cryptocurrency market. Stablecoins do not offer the “get rich quick” opportunity. Stablecoins are an inexpensive and practical way of getting into cryptocurrency. They “should” maintain their value. Stablecoins have the potential to play a significant role in global finance down the road, especially for payments and financial services. They are available twenty-four hours a day, seven days a week. That means they are more accessible than cash through the banking system, which is closed overnight and on weekends. There are dozens of stablecoins in use today. The four main types of stablecoins are fiat-backed, crypto-backed, commodity-backed, and algorithmic.

With all this said, stablecoin recently took a hit with customers losing their investments and feeling scammed through a company called Stablegains. So, the question we need to answer and understand “Are stablecoins really stable?” Investors discovered that stablecoins weren’t as safe and predictable as promoted. Many people put their money into the coin, Stablegains, and were shocked to learn they lost their funds after the crash of the stablecoin terraUSD in May. That means the money they entrusted to the company was gone or decreased tremendously. Federal officials are looking into the stablecoin market because of the terraUSD and Stablecoin. Remember that is one incident in the stablecoin market out of two hundred varieties worldwide. If your first cryptocurrency encounter is stablecoins, invest in a cold storage wallet for added protection and security.