Cryptos can become problematic as an investment. Volatility is just one problem you have to deal with, making it very risky for an investor to trust virtual coins. Good thing is, the development has resulted in a new type of cryptocurrency which is the Stablecoin. Knowing that it could pin down volatility for good, you should know what is Stablecoin and how to choose one for investing.
In simple words, Stablecoin is a type of cryptocurrency that bases its value on real-world counterparts. It can be real life currencies like the Dollar and Euro, or precious metals like gold and silver. It doesn’t lean on virtual factors alone, like supply-demand relationship and the difficulty of the mining process.
This reliability factor has enabled Stablecoins to efficiently solve the problem of volatility. Simply because it bases its value on real-life counterparts, it does not easily rise and drop dramatically in a snap. This assures investors that they are going for non-risky investments in the crypto world.
After knowing what is Stablecoin, you have to choose and invest in a particular type. One of the key factors to consider is the real world commodity that backs the Stablecoin.
You can choose to have currency-backed Stablecoins. However, gold or silver backed cryptos prove to be better choices. This is because real-world currencies are sensitive to various economic factors.
For example, the world has witnessed how the Dollar dropped during the Great Depression. That could happen anytime to any currency as well. Invest in a crypto backed by shaking currency and you’ll be running a quite risky investment.