The cryptocurrency ecosystem is complex. The most traditional digital currencies — Bitcoin, Ethereum, Dogecoin, Solana, Shiba Inu, etc. — are not valued by a intrinsic value, nor are they anchored to an asset that supports them (precious metals, monetary funds, reserves, etc.). Their price depends solely on the supply and demand, which is somewhat subjective. For this reason, they are cryptocurrencies of very unstable valueFor example, Bitcoin reached a price of $2024 in December 100; however, in the first quarter of 2025, that price dropped by more than 25%, to approximately $83.000.
This high instability in the value of an asset This is what is called “volatility"There are several drawbacks to this volatility, such as: Difficulty investing, constant uncertainty about the capital held, high financial risk, as well as low liquidity, since volatile cryptocurrencies are often not accepted as a form of payment.
PREPARE YOUR WALLETFinancial experts insist that volatile cryptocurrencies should be used for long-term investments (although they can go down in value, they can also go up very quickly). However, for medium-term investments and payments, it is best to use a different type of cryptocurrency, one that is more stable in value. This is how the concept of volatile cryptocurrencies came about. stablecoins.
What are stablecoins?
They are coins created for balance the rises and falls of volatile cryptocurrencies. It is impossible to maintain peace of mind in the cryptocurrency market without the help of stablecoins. Their main characteristic is that they are a digital asset whose price remains constant over long periods of time. To achieve this stability in their value, stablecoins are pegged to other assets in a parity relationship.
A well-known stablecoin is USDT (Tether), whose price is pegged to the US dollar. This strategy creates a cryptocurrency that doesn't suffer the fluctuations in value of cryptocurrencies like BTC. Among the most well-known stablecoins, we can mention the following: USD Coin (USDC), Binance USD (BUSD), DAI, Pax Gold (PAXG) and more.
LINK CARD AND EARNThis type of Stable currencies allow companies to have capital that does not experience unexpected fluctuations.. They are the most widely used in commerce and their purpose is to provide a measure of serenity in the ups and downs of crypto prices. Many people use them on exchanges, especially for immediate purchases or sales, since in these cases it is better to use currencies that maintain a constant price.
How do stablecoins maintain their value?
A stablecoin doesn't fluctuate in price unexpectedly. They aren't cryptocurrencies that depend on supply and demand, but rather use backup methods. Strategies can be of four (4) types:
- Collateral with fiat money: These are the most common, as they are secured by reserves in hard currencies, such as the dollar or the euro. The advantage is that They have a very simple parityEach cryptocurrency is equivalent to 1 dollar or 1 euro. For these stablecoins to function properly, it is imperative that bank funds equal the amount of crypto in circulation.
- Collateral with crypto: are cryptocurrencies created to achieve stability in cryptocurrency ecosystems. In this case, The stablecoin can only be purchased by giving an equivalent value in dollars in exchange, But in another cryptocurrency. An example of this is DAI, which is a digital currency that can be purchased with Bitcoin, Ethereum, etc. This type of stablecoin collects the excess from other cryptocurrencies and summarizes their value with parity.
- Collateral with assets: These cryptos are backed by various types of assets. This is the case with stablecoins that They rely on precious metals such as gold or silver (Tether, Digix, Gold-XAUT), or those backed by real estate assets (MANA, SwissRealCoin); or those backed by resources such as oil or gems. In general, these types of assets increase in value over time and support cryptocurrencies.
- Digital currencies algorithmicStablecoins: These are stablecoins that aren't backed by fiat currency or any other type of asset. They maintain their price through algorithms that reduce the supply of coins if there's an excess in the market. They're very advantageous, but they have a problem. When the stablecoin's price drops too quickly, the algorithm eliminates too many coins, creating little liquidity.
This is the secret story behind stablecoins: They always depend on something that keeps their value stable. At the same time, Their problem is usually liquidity, since they cannot be issued in quantities higher than the value of their backing assets (or algorithms).
TRADE WITH STABLECOINSSome say that stablecoins are equivalent to fund certificates or company shares. There is no denying that they are very useful currencies, since They usually link the world of cryptocurrencies with more conventional assets..
The advantages of stablecoins
They are not coins to invest and generate profit, since its price is stable, it doesn't increase. Therefore, it's not for long-term investors that it offers its benefits, but rather in other circumstances.
- They are cryptocurrencies perfect to be exchanged for fiat money. Its 1:1 parity does not imply losses in these transactions.
- Stablecoins are the most used for trading, since they protect the capital of those who engage in this activity.
- When Volatile cryptocurrencies plummet, people tend to sell them in exchange for stablecoinsThis way, capital remains immersed in the crypto world without converting it to fiat currency.
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Finally, stablecoins are more widely accepted in the mainstream financial world: banks, insurance, e-commerce, etc.. It is added that they are ideal for international transactions, since they don't lose their value. So these cryptocurrencies have become indispensable for stability and confidence in the cryptocurrency landscape.
