FOR investors who have a tough time dealing with their cryptocurrencies rising and falling in rapid waves – stablecoins might be for you.
Volatility is a big element that investors need to prepare for when investing in cryptocurrencies.
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For the most part, this is normal in the crypto space because of the explosive gains they see during bullish runs.
That could then lead to a sell-off because some investors are looking to cash out on their profits while they still can.
For example, this has happened multiple times in the past year with major cryptocurrencies including Bitcoin and Ethereum.
Despite the rapid swings, Bitcoin and Ethereum are up 31% and 224% over the past year, according to Coinbase.
However, these investments aren’t for everyone and certain investors might want to look elsewhere for a safer bet like stablecoins.
What is a stablecoin?
The idea of a stablecoin was first proposed in a white paper by initial coin offering inventor J.R. Willett in 2012.
As its name suggests, the coins aim to act stable – and avoid volatility.
This is because its value is fixed through an asset such as a commodity or a currency.
The downsides of stablecoins
However, just because your assets are taking big swings, doesn’t mean you can’t get frustrated with stablecoins.
This is because most stablecoins often offer much less upside when compared with traditional cryptocurrencies.
For instance, major stablecoin Tether is trading flat currently versus the same period last year.
Meanwhile, there are some exceptions to volatility in the stablecoin sector.
In November, GYEN, whose currency is the Japanese yen (JPY), skyrocketed by 247% after Coinbase allowed its pro members to start adding the token to its accounts.
Marie Tatibouet, chief marketing officer of crypto exchange Gate.io, told The Sun at the time: “It looks like the demand is so high that the peg has failed to hold.
“A good stablecoin shouldn’t surge or fail under scrutiny.”
However, the coin did not hold at those heights and tumbled days later.
To avoid this, make sure you check out the trading history before you potentially buy a stablecoin.
You’ll of course want to look out for big jumps or falls.
Some other major stablecoins include Dai, Binance USD, USD Coin, and TrueUSD.
We’ve done price predictions for MANA, Dogecoin, Shiba Inu, dYdX, DogeZilla, and Sandbox.
Also, check out four things you need to know about Dogecoin.
