Crypto Investing
2 Feb 2021

Top Usecases of Stable Coins

Farheen Shaikh

What is the use of Stablecoins?-You have probably thought about this multiple times.

The question is self-evident, knowing that Stablecoins are cryptocurrencies without volatility.

Volatility has been hyped up so much that people have ignored stability completely.

Investing in stablecoins doesn’t even cross people’s minds; everybody is investing in volatile crypto assets.

I agree that volatility has the potential to give you exponential returns, but what you often forget is volatility also means risk and the risk that comes with volatility can only be tackled through stability.

And stablecoins give you the stability to tackle and survive in the volatile crypto market.

Usecases Of Stablecoins

Now that you know how important stablecoins are, let’s understand how we can use them our benefit:

1. Brings Stability to a Volatile Market

Decentralization and a Trustless financial system are the key components of cryptocurrencies in general.

But utilizing it becomes difficult for people who don’t want to play around with volatility.

A perfect solution to this is, Stablecoins, which are cryptocurrencies that allow you to benefit from a decentralized, trustless financial system without the fear of volatility.

Since the value of stablecoin remains stable and doesn’t experience drastic movements, individuals can freely transact without worrying about losing money. And thus giving people a sense of security while transacting.

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2. Safeguards Weaker Currencies

Every country has its own fiat currency, but every economy is not equally thriving.  Some nations are comparatively more developed than others and thus have varying inflation rates.

For example, The U.S has an inflation rate of less than 2% while India has an inflation rate of around 5%. So if you see the value of every U.S dollar will diminish at a comparatively lower rate than the Indian rupee.

And that is where Stablecoins can help you.

Individuals need cash at their disposal to take care of unexpected expenses, but if we keep it like that in our bank account, chances are inflation will slowly eat up your money.

On the flip side, you could have invested in a stablecoin pegged to a stronger fiat currency to protect you.

Stablecoin also helps in hyperinflation, where the value of one’s native currency falls steeply because of extreme market conditions.

3. Digital Cash

Stable coins are pegged to specific fiat currencies like the U.S dollar, Euro, cryptocurrency, or other commodities like gold. Meaning as the price of the pegged asset moves, the value of your stablecoin will also move in line with that.

It’s like giving your physical assets like cash or gold a digital form, which can then be used to pay for the goods or services. Here people leverage the faster, efficient, and secure blockchain technology to enable transactions effectively.

People also use stablecoins to store cash or a commodity they don’t want to hold physically.

4. Helps Traders Escape Volatility

Traders are bound to conduct frequent trades and thus are hit by market volatility often.

When trading in prominent cryptocurrencies like Bitcoin, Ethereum, etc., it becomes difficult for traders to move on and off-board frequently. But since stablecoins exist, they can move on and off-board swiftly and can instantly realize their profits.

Stablecoins also come in handy to normal investors during a bearish market. They can convert their usual crypto holdings to stablecoins and escape the steeping market without cashing out.

So these were a few ways to use stablecoins; they help you make the most of the greatest technology right now. And it’s good to see stablecoins bring decentralization to those not fond of volatility.

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Farheen Shaikh

Content Writer

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