Use stablecoins to hedge price fluctuations

Stable currency, as the name implies, refers to a digital currency that maintains a stable value. They are usually pegged 1:1 to the U.S. dollar. Although stablecoins can be linked to anything, such as an ounce of gold, various legal currencies, or even a basket of commodities. Here we will talk about how to use stablecoins to hedge against price fluctuations.

“Volatility” and “uncertainty” have become synonymous with the digital currency world. As many people know, double-digit changes rarely occur in traditional markets. In the world of digital currency, changes are indispensable!

To help manage this volatility, stablecoins were developed. It is a token that maintains price stability. Regardless of the market trend, the value of stablecoins is the same, allowing traders to protect their assets when the market is uncertain.

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How stablecoins can help investors manage volatility

To understand how stablecoins can help protect investor portfolios and manage volatility, consider the following examples:

Suppose that Bitcoin is traded at $60,000. However, due to severe price fluctuations, it skyrocketed by several thousand dollars within a few hours. In order to protect their investment portfolio from such fluctuations, traders can purchase stablecoins worth $60,000. Once the market stabilizes, these stablecoins can be exchanged for bitcoins and still have bitcoins at a price of $60,000. This is beneficial for traders who are unwilling to risk Bitcoin falling below the potential loss of $60,000. Timely prices may be higher.

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Other uses of stablecoins

In addition to playing the main role of hedging price fluctuations, stablecoins also have other functions, two of which are outlined below.

Use stable currency instead of fiat currency to buy daily commodities: The biggest obstacle to the adoption of digital currency is its volatility. If you buy goods worth $2,000 at the price of 1 ETH, the price may drop when the merchant exchanges tokens. Conversely, if the price rises, the value will fall.

By using stablecoins as fixed currencies, buyers and sellers can always guarantee the fixed value of the tokens that are traded or recharged, making digital currencies easier to trade.

Banking services: In countries that lack reliable banking services or have limited funding sources, stablecoins can be used for savings, loans, and investment. Stablecoins also provide a simple and effective path for digital currency trading economies, and provide traders and investors with a wide range of DeFi products that currently cannot effectively cooperate with traditional financial systems.

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Commonly used stable coins

The following introduces the most popular stablecoins in the three markets

USDT

USDT is a symbol of Tether. It is pegged to the US dollar 1:1. It runs on many different blockchains and is supported on many exchanges. You can easily send and receive Tether around the world instead of charging high transfer and telecommunication transaction fees with USD remittance.

USDC

USDC is a stablecoin produced on the Ethereum chain by Circle and Coinbase. In addition, it is also linked 1:1 with the US dollar, which can be used as a hedge against inflation when the market fluctuates sharply.

TUSD

TUSD stands for TrueUSD and is the token of Trust Token on the Ethereum chain. Trust Token is a TrueUSD project that aims to create better financial opportunities and a frictionless global financial ecosystem. TUSD is linked to the U.S. dollar, and Trust Token has issued TGBP linked to the British pound, TAUD linked to the Australian dollar, TCAD linked to the Canadian dollar, and THKD linked to the Hong Kong dollar.

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Invest in cryptocurrency and learn how to use Stormgain’s stablecoin.

Stablecoin is an innovation that not only demonstrates the solutions, flexibility and availability of many digital currencies and DeFi products, but also helps traders manage the uncertainty and risks brought by digital currencies and DeFi transactions.

If you are interested in digital currency or investment, but are worried about market fluctuations, please pay more attention to stable coins.

StormGain is easy to buy, sell and understand digital currency. StormGain’s platform also supports Tether, the most popular stable currency in the world. Visit Stormgain to learn more about digital currencies and create your own digital asset portfolio.

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What to expect from Stablecoin’s future?

Crypto currencies had an interesting trading week with BTC/USD and XRP/USD along with various other coins reaching October highs only to correct lower.

The upward movement noted on Monday the 15th of October was, when Tether’s, the company offering the most recognized stablecoin, found itself in the spotlight.

Tethers stablecoin which is called the USDT, fell by 15% as traders sold Tether and pushed the price of bitcoin or BTCUSD higher.

Bitcoin reached its peak for October on the event and at some point was trading at a 10% premium on some popular exchanges like Bitfinex the third largest cryptocurrency exchange by volume.

A stablecoin traditionally trades at or very close to $1 as it is a U.S. dollar backed coin that investors use to trade between different cryptocurrencies as opposed to going in and out of fiat.

Tether (USDT) is a blockchain based asset meant to trade for $1 USD but traded to 88 cents on Bitfinex.

The event caused a mass selloff of the stablecoin and the equivalent strong purchasing was enacted on BTC/USD and other cryptos against the dollar.

Stable coins in general took criticism on the event as some market participants claimed credit risk was in play and others questioned exchanges power of these coins as significant backing is required to keep the coins at comfortable high levels of worth.

On other news, according to statistics cryptocurrency robbery through hacking of exchanges and trading platforms grew approximately to the amount of 1 Billion USD counting only for the first nine months of 2018, increasing by 250 percent from the level seen in 2017.

The specific report was from a U.S based cyber security firm CipherTrace and investigates criminal activity and money laundering in the digital currency market.

The report also showed a steady increase in a number of minor cyber robberies between the range of $20-60 million.

This type of publicity is what is holding down investment and price increase for the Cryptocurrencies, as Bitcoin’s rise and the creation of more than 1000 other digital coins or tokens has attracted many cyber thieves into the unregulated world of digital coins.

On the other hand, Goldman Sachs’ Principal Strategic Investments group and Galaxy Digital Ventures LLC have taken action for the second round of investing in BitGo, a firm specialized in institutional grade cryptocurrency security.

The two firms join a group of other strong Investors who sponsor BitGo’s development of its $1 trillion crypto wallet.

Furthermore, Cryptocurrency exchange Coinbase is extending its offices by adding one in Dublin.

Coinbase, is one of the biggest U.S. exchanges and the strategic move of opening an office in Dublin, would enable it, to keep providing services in EU countries even after Brexit and it is licensed to provide fiat currency-related services across 23 EU countries.

It is great to see institutional investors like Goldman Sachs entering the digital asset world and Coinbase expanding services in Europe.

The action exemplifies confidence for the Industry and the fact that coins could be a diamond in the dirt that has not been found yet.