Stablecoins: Safe Haven in a Volatile Market

WhiteBIT
Published 19 October 2021

Cryptocurrencies are known for their high volatility as compared to fiat currencies. This, among other things, can be explained by the relative novelty of the crypto market, which means a small number of participants in comparison with the traditional asset market. The price fluctuations of coins and tokens can benefit traders. However, it makes cryptos rather risky to invest in and not so convenient for making payments. For example, once the transaction is settled, the price of the sent cryptocurrency may differ significantly from the initial one. This is where stablecoins come to the rescue.

What are stablecoins, and how can they be useful?

Stablecoin is a type of cryptocurrency whose market value is tied to the value of a specific asset. The most popular type of stablecoin is a fiat-backed one that is pegged to fiat currency with a 1:1 ratio. In this case, the issuer keeps a certain amount in reserve currency and issues a proportional amount of stablecoins.

Stablecoins were originally developed as a risk management tool in trading. Traders use these assets with a stable price to lock in profits without converting funds to fiat. Also, the predictable rate makes stablecoins convenient for financial transactions and allows them to act as a store of value instead of other, more volatile types of cryptocurrencies. Stablecoins are especially useful for investors for hedging their portfolios.

How to use stablecoins as a hedge against inflation?

Most fiat currencies are prone to inflation, and their value declines over time as more units are put into circulation. Nevertheless, the fiat currencies of the countries with a high level of economic development usually have a relatively low inflation rate. It means they have a more stable price and can serve as a store of value. USD and EUR can be distinguished among such currencies.

Volatile fiat money makes a rather poor store of value and may lead to losses. However, it is rather difficult to exchange local currency for less volatile assets in countries with high inflation rates. This is where stablecoins come in handy. They can be easily purchased from anywhere in the world if there is access to the Internet.

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Stablecoins on WhiteBIT

You can buy the following stablecoins on our exchange: USDT, USDC, TUSD, and DECL.

USDT

The value of Tether (USDT) is pegged to the US dollar with a 1:1 ratio. The coin is currently one of the most popular stablecoins in the world and is often considered a digital counterpart to the dollar. Tether is implemented on various blockchains. On our exchange, you can make deposits and withdrawals of USDT on the Ethereum, Omni, BSC, TRON, and EOS networks.

USDC

USD Coin (USDC) was created by Circle as an alternative to USDT. 1 USDC is also equal to 1 USD. However, the project is positioned as more transparent than Tether. USDC has an open-source code and provides all the necessary information about financial accountability. USDC is also widely used in DeFi projects to increase liquidity.

TUSD

True USD (TUSD) is backed by USD with a 1:1 ratio. The TrustToken platform issues the cryptocurrency, and its collateral is stored in the banks of the trust companies. The enterprise is open to third-party audits and publishes reports on available reserves. Moreover, the holders of the currency are legally protected.

DECL

Decimal Token (DECL) is an intermediary asset of our exchange that is aimed to enable trading of tokens whose price is lower than 0.00000001 USDT. It is an off-chain internal token with a stable price rate of 0.0001 USDT. The stability of the price is ensured by WhiteBIT providing order book liquidity.

How to buy stablecoins on WhiteBIT?

First, you need to deposit fiat or crypto that you can later get USDT for. Then use one of the following methods:

  1. place an order for the pair containing USDT;
  2. exchange fiat or other cryptocurrencies for USDT;
  3. acquire with fiat directly from your credit card via Mercuryo.

The other stablecoins (USDC, TUSD, and DECL) cannot be acquired through the Exchange service or bought via Mercuryo at the moment. You can get such assets by trading.

USDT SMART Staking plans

Besides trading, you can use Tether to generate passive income. There are currently 6 plans with USDT available on our exchange. You can hold an asset from 10 to 360 days and receive a profit of up to 30% per year.

Closing thoughts

Stablecoins act as a kind of “refuge” in the highly volatile cryptocurrency market. This type of digital asset can be useful for both traders and ordinary users. Stablecoins allow you to make fast and accessible transactions globally, hedge risks, and lock in profits.