2021 has been quite the year for cryptocurrencies. The market leaders, Bitcoin and Ethereum, both hit record highs, but they are currently in recovery mode after a big dip caused by flippant Elon Musk tweets and the threat of increased regulation in China.
While it is often the volatile nature of the crypto market that draws many recreational investors there in the first place, this same volatility is also perhaps the biggest reason why so many other potential investors stay on the sidelines. With the potential for volatility unlikely to go away any time soon, a new, less volatile form of cryptocurrency is quickly gaining popularity.
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Stablecoins do not mirror the volatility of the crypto market because they are stable by their very nature. This is because they are backed by assets that exist outside of the crypto sphere. One of the most popular stablecoins is Tether which has its value tied to the US dollar. The market may rise and fall, but Tether remains pegged to the value of one US dollar.
While the stable crypto forms of national currencies, such as Tether, may protect against the wider crypto market swings, fiat currency backed cryptos are still affected by the underlying fear of inflation and the impact this could have on the currency’s buying power over time.
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