How Stable are the Top Stablecoins? A Quantitative Analysis

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Over the last decade, cryptocurrencies have become tremendously popular. This popularity can be attributed to how they are exchanged. All of the transactions take place digitally. These digital currencies are predominantly stored online. However, most digital currencies, such as the Bitcoin, tend to be volatile. Their prices can change anytime. People who make lots of money through various digital currencies do so by predicting the impending change accurately.



What are stablecoins?

Stablecoins are another form of digital currencies. But unlike Bitcoin and the rest, stablecoins promise more stability. Though traders love digital currencies’ volatility because it enables them to manage risk and profits from the market shifts, dealing with a less volatile instrument of trade is much safer. Stablecoins have gained much ground because they are secure and traders can process them instantly.


Are stablecoins stable?

If you know a little bit about Bitcoin, you know it is not friendly in everyday use. Its value could change significantly in a matter of days or even hours. For most people, this is not ideal. Preserving value through Bitcoin is a risky move. But what if you want to store value as well as a trade? The answer may not be as straightforward as you’d wish. It all depends on the kind of trader you are. If you prefer secure and stable investments, stablecoins are the better choice.


Most people do not pay for products with bitcoin due to its volatility. Stablecoin seeks to resolve this issue. Some people liken Stablecoin to fiat currencies such as the dollar. The only difference is that they are in digital form. Why so? Stablecoins are pegged to a valuable asset. This could be a fiat currency or precious stones. They could even be pegged to real estate.

That said, a stablecoin is as stable as the asset it is attached to. So if the currency is pegged to the Euro, then it will be as steady as the Euro. You need to know that fiat currency, real estate, and even precious stones fluctuate in value. Also, the trading volume of such assets could cause some instability in Stablecoin. Nonetheless, the volatility of these assets cannot compare to that of other digital currencies.

Did you know you can earn interest from your Stablecoin ? You need to deposit EUR into your YouHodler account, and then convert the EUR to your preferred stablecoin. After that, transfer the digital currency to a savings account, and at that point, your weekly interest payment period commences.


Uses of Stablecoin

Most people use stablecoin to protect the value of other cryptocurrencies. For example, if you are currently holding Bitcoin but you are afraid that its value will fall, you could trade it to stablecoin. By doing so, you will have protected its value, and you can always trade it back for Bitcoin whenever you want to. The main objective of stablecoin is that it can be used for daily transactions. We may not be there yet, but as it continues to garner massive popularity, this objective could be achieved.


Fiat-collateralized stablecoin

When we talk about the stability of stablecoin, you may not fully understand it. But in this section, we will give you a perfect example. Fiat-collateralized stablecoin is pegged to fiat currency in a ratio of 1:1.

For instance, if one stablecoin is attached to the Euro, this means that there is 1 euro stored as collateral for each stable coin. If this fiat currency fluctuates, the same happens to the stablecoin.

Stablecoins are becoming popular among users. They are seen as one way of making cryptocurrencies mainstream. From a stability point of view, these coins have shown immense potential.

For those who like to venture into digital currency but are afraid of the volatility, stablecoin is much better than its counterparts. As you can see, the future of this currency is bright, and given that most people fear digital currencies due to their volatility, stablecoin is here to stay and make a difference.

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