What is Stablecoin and how to buy it on WhiteBIT

Cryptocurrencies are more volatile than fiat currencies. It’s due to the relative youth of the crypto industry, which means fewer participants compared to the traditional market. Sudden changes in the price of coins and tokens can benefit traders. But it also might make cryptocurrencies risky for investments and not very comfortable for making payments. After the end of the operation, the value of the sent cryptocurrency may vary from the price before the deal. This explanation might be exaggerated, but it illustrates the fears of most of the beginners. Stablecoins can be used to solve the problem.

What is a Stablecoin?

Stablecoins are digital assets whose crypto market price is pegged to the worth of a fiat asset (i.e. dollars, euros, etc). The most common stablecoin is a fiat-collateralized pegged to fiat currency at a 1:1 ratio. It means the issuer holds a certain amount of the reserve money and issues a proportional number of stablecoins.

Stablecoins were created as a method to cut the risks in trading. Traders use these price stability assets to lock in profits without converting funds to fiat. The predictable rate makes stablecoins comfortable for financial transactions and lets them act as a store of value instead of other, less stable groups of cryptocurrencies. Stablecoins are helpful for business people who decide to hedge portfolios.

The largest stablecoins include USDT, USDC, and TUSD. The catastrophic stablecoin crash that occurred almost overnight with TerraUSD exposed the shortcomings of individual elements of the stablecoin area, especially the so-called algorithmic virtual currency.

Types of Stablecoins

There are several groups of stablecoins; the classification relies on the tools prefer to balance the cost:

  • Fiat-collateralized stablecoins back a reserve of fiat banknotes, e.g., the US dollar. It guarantees the worth of the stablecoin. One more possible variants of the guarantee are precious metals and goods such as crude oil, etc. However, most modern fiat-collateralized coins receive dollar reserves.
  • Crypto-collateralized stablecoins are backed by various virtual money. Since the decentralized reserve money may also be subject to significant volatility, these stablecoins are overcollateralized. In other words, the cost of the cyber cash held in reserves is more than that of issued stablecoins.
  • Algorithmic digital money can or can not contain reserve assets. Their peculiarity lies in maintaining a stable price of a stablecoin by monitoring its supply using computer software that works according to a given algorithm.

All stablecoins are under scrutiny from regulatory authorities, given the sharp increase in the $140 billion industry and its potential to influence the worldwide economic processes.

How to buy Stablecoin on WhiteBIT?

WhiteBIT is a famous crypto European exchange. We recommend creating the profile on WhiteBIT, trading crypto coins for revenue, or purchasing and holding digital money for any term, receiving passive revenue. Below, we describe stages of buying stablecoins on WhiteBIT:

  1. In the beginning, you must create a user profile on the exchange. Click «Sign up» in the upper corner and provide all the essential information.
  2. Then deposit crypto coins or government-issued currency. To conduct transactions with fiat, you must pass verification. All these steps will take up to five minutes.
  3. Select «Exchange» and exchange the necessary amount of deposited currencies for Tether (USDT).
  4. You can also place a trading order. Go to the Spot trade and in the Market field indicate the ticker of the deposited currency in the pair with USDT. Place an order.

What can you do with stablecoins?

Utilizing decentralized money, you may perform several actions:

  • Reduce volatility. Sometimes the price of cryptocurrencies fluctuates dramatically, maybe in seconds. An asset pegged to a stablecoin gives market participants the confidence that the value of tokens will not skyrocket or fall any time soon.
  • Trade or keep. There is no rule that you must open a bank account to hold stablecoins, and transferring them is simple. The value of stablecoins can be instantly sent worldwide, including to cities where the dollar can be difficult to find or where state banknotes are unstable.
  • Receive interest. There are easy options to earn interest (more profitable than in cooperation with the bank) on investments in stablecoins.
  • Transfer at minimal cost. People can send up to millions of dollars USDT with a commission of no more than a dollar.
  • Send internationally. Quick processing and minimal transaction commission make stablecoins like USDT an excellent variant to send capital anywhere.

Cryptocurrencies were created to replace intermediary companies that are usually trusted with people’s savings. Intermediaries control this money; for instance, they can usually stop the transaction.

Conclusion

Experts call stablecoins a «refuge» in the highly changeable crypto universe. Such a group of crypto assets may interest traders and ordinary users. Stablecoins allow you to make easy and affordable financial operations in any country, hedge risks,  and fix income.

Huynh Nguyen

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