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Stablecoins have become increasingly popular, with their market cap reaching $164 billion in August 2024. But how are they different from other cryptocurrencies? And are they a good investment? Let’s explore more about what it is.
Stablecoins are cryptocurrencies that have their price pegged to or backed by a stable asset, or group of assets. Most are pegged to fiat i.e. real currency. However, some may be pegged to the price of commodities such as gold, or even other cryptocurrencies. Some are not pegged to any asset.
Many see stablecoins as having the best of both worlds – they possess the blockchain technology that most cryptocurrencies possess, but are without the volatility that Bitcoin and other cryptocurrencies can suffer from. They are stable coins in the literal sense of the word.
Key Takeaways:
Stablecoins are cryptocurrencies that have their price pegged to or backed by a stable asset, or group of assets.
There are four different types of stablecoins available on the market: three are backed by collateral, and one is not.