Crypto trading has been gaining some serious traction since the bull run of bitcoin and cryptocurrencies that happened back in 2017. With bitcoin almost touching the $20,000 mark back in December of 2017, all eyes of the financial world were focused on cryptocurrencies. Although since then, things have not been great for the crypto market. The bear market is in effect for quite some time. But people are still interested in the aspect of crypto trading. Many people are holding or ‘HODLing’ their money with the hopes that the prices will go up once again. But besides regular cryptocurrencies, there are some cryptos that are backed by fiat or some other exchange-traded commodity, the stablecoins. How do they fit in this picture of crypto trading?
Stablecoins essentially tackle the issue of volatility that is associated with other cryptos. As they are backed by fiat or some commodity, their prices do not fluctuate too much and too often. Now, most people in the crypto trading arena want to trade for cryptos that are going to rise in prices in the coming time in order to gain as much profit as possible. With stablecoins, this is not the case. The prices are largely stable. So why would someone trade their cryptos with them?
One of the most important aspect to look out here is that stablecoins can prove to be very effective as a store of value in a bear market. For more than a year now, the crypto market is engulfed in a continuous bear run. Bitcoin, ethereum, XRP, and other major cryptos have lost a lot of market capitalization and their prices have also fallen down. In such a situation, trading for stablecoins might make the most sense for the investors. With different assets going in the downward direction during a bear run, storing in stablecoins helps one maintain the value he/she has while remaining in the crypto arena.
Stablecoins posses the same characteristics possessed by other cryptos because they are based on the same technology of blockchain, besides the fact that they are backed by fiat. The features of trust and transparency are also automatically inherited into the stablecoin world. Now they might not make the most sense as ‘pure’ cryptos, they certainly possess a very strong potential in this space as they form a bridge between cryptos and fiat. Crypto trading might not make sense for stablecoins but there are many other niches where they can prove to be extremely beneficial.