Stablecoins: a refuge from the volatility of cryptosystems

 

All of us who participate in the crypto market know about the volatility of cryptomonies. We are constantly experiencing large increases and sharp declines in the price of virtual currencies such as Bitcoin. This is one of the reasons why many people do not want to enter the world of cryptoactives. Luckily, there are stablecoins, a refuge against the volatility of cryptomonies thanks to projects like Tether and BUSD.

Tether, the stablecoin that doesn’t stop growing

Volatility in the crypto world
For many analysts, the main characteristic of the cryptomoney market is the volatility in its price. Because it is a relatively young market, the price of virtual currencies, such as Bitcoin, is vulnerable to strong buying and selling movements.

This is so because of the size of the cryptcoin market. For, despite having a capitalization of hundreds of millions of dollars. It’s still not enough to prevent the shares of the main investors in crypto currencies from affecting their price. Allowing that the investment decisions of a small number of users known as whales, can strongly affect the price of the crypto currencies.

Therefore, it is logical that many people think twice before putting their capital in the cryptomonies. After all, if we are looking to protect the value of our money, a currency that can fall up to 50% in price in a single day, it is not a good place to take refuge.

Not to mention the problems this would bring when acquiring goods and services, since from one minute to the next we can stop having enough money to pay for the merchandise we want to acquire.

Stablecoin from Binance BUSD, will be able to operate in banks in New York

Stablecoins and the stability of crypto coins
This is where stablecoins come in, virtual currencies whose value is based on a reserve fund of a financial asset outside the crypto world, whether Fiat money or natural resources. In this way, the price of stablecoins would not suffer the constant changes to which crypto currencies such as Bitcoin are subject. Rather, their price would remain anchored to the price of the asset that makes up the reserve fund that gives it its value.

Of course, stablecoins generate a new problem. Well, if crypto-currencies were created with the intention of decentralizing the financial world. The stablecoins would be a step towards a greater centralization, since an administrative organization is needed to conform the reserve fund that guarantees the value of the stablecoin.

Consequently, the trust generated by this administrative organization of the stablecoin is fundamental for its future. The most successful case to date is that of Tether, the first stablecoin established in 2014, and which today is still the most important in the world, with a fixed price of 1 USDT = 1 US dollar. And the Binance stablecoins, The News Spy based on the American dollar and BGBP on the British pound.

In the case of Binance, its stablecoins also have an additional feature. These run in two Blockchains at the same time, in Ethereum as ERC-20 tokens and in Binance Chain as BEP-2 tokens. Providing greater flexibility to your virtual currencies, and making them the perfect refuge from the volatility of cryptosystems.

 

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