How Can Stable Coins Protect You From FIAT Inflation & Crypto Volatility?
In case you didn’t know, a Stable Coin is simply a cryptocurrency that has its value pegged to a government established currency (fiat). Ever heard of USDT (Tether)? That’s an example of a stable coin. USDT has its value pegged to the US dollar; this means that 1 USDT is exactly equal to $1. In today’s article, I’m going to tell you about some of the best stable coins.
Stable Coins VS Crypto Market Volatility
As far as the crypto market is involved, volatility is the norm. Rather than giving a dictionary meaning of volatile, I’m going to tell you a story. So a couple of months ago, my dad told me he wanted to invest in crypto. It turned out that in a discussion with his friends, he was made fun of for not having any crypto. I bought some crypto with his Binance account, and the next morning he noticed that his portfolio was down by 10% and came charging down to my room. I had to explain to him that it was a normal thing in the crypto market. “Greens and Reds always come out of nowhere”, I remember saying.
This is the volatility I am talking about. The reason why we always see sudden pumps and crashes in the crypto market is that it is extremely volatile. Because the value of stable coins is pegged to a government established currency, the US dollar, for example, is resistant to the volatility we see in the crypto market.
If the prices of all cryptocurrencies available go down by 50%, stable coins won’t be affected. The stability of stable coins is credited to a facet of collateralization as they are always backed by reserves.
Stable Coins VS FIAT Inflation
If you are like me, you might have wondered at some point why your country can’t just print more money and become the richest country in the world. Well, unfortunately, we can’t do this because it would result in your country suffering from high inflation rates. Your grandparents might have told you before that in their time you could go to the grocery store with as little as $20 and still come out with a large supply of food — this is still a result of inflation.
Inflation is a decrease or decline in the purchasing power of a government established currency (fiat) over time. The USA recorded its highest case of inflation in the past 39 years as it recorded an inflation rate of 7%. Although this can be considered as low when compared to the inflation rates of countries like Zimbabwe, Venezuela, and Argentina which have inflation rates of 92.540%, 2700%, and 50.942% respectively.
Since there is stability when it comes to Stable coins and printing is not involved since it is digital, it can serve as a cure to inflation plagued countries such as Zimbabwe, which is known to have printed so much money in 2008 that it led to a downfall in the economy. It can also make out-border transactions cheaper and faster. I can’t say for sure what Zimbabwe’s economy would be like if they were to adopt stable coins, as there are still other factors that can affect it, however, what I can say for sure, is that there would be a decrease in inflation.
As promised at the beginning of the article, here are some good stable coins you should buy. All the coins in this list are pegged to the US dollar: