Despite this, stablecoins play a major role in cryptocurrency and are popular assets for investors and traders alike.
So what exactly are stablecoins, and why are they different from other cryptocurrencies?
What Is a Stablecoin?
Stablecoins are a form of altcoin in cryptocurrency that seeks to ensure price stability within the cryptocurrency market.
This means that USDT and USDC will always be worth $1, no matterhow volatile the market becomes.
As the oldest stablecoin of its kind, Tether provides us with a comprehensive history of stablecoins in practice.
But what sets stablecoins apart from traditional cryptocurrencies for investors?
And why are stablecoins so different technically from their counterparts?
How are Stablecoins Different from Other Cryptocurrencies?
Because their value isn’t linked to any other asset or algorithm, they can experience significant price volatility.
These assets are backed by collateral to help investors safeguard against market downturns among more traditional cryptocurrencies.
Furthermore, some exchanges like Bitfinex require users to purchase Tether before converting their holdings into other assets.
However, it’s also important to highlight that the stablecoin ecosystem isn’t entirely risk-free.
In the past, leading stablecoins like Tether have experienced controversies based on the assets' stability.
In staying braced for the unexpected, investors can be best prepared for unexpected complications should they arise.
