Whether you earn or buy Bitcoin cash to use as a currency, or for investing, or to store value, one thing is certain: someday, you’re going to want to cash out. But cashing out isn’t always so simple because of crypto currency volatility. Bitcoin cash BCH is famous for its volatility, moving more in a day than traditional stocks do in a month. This is a general cryto characteristics due to market cap. Volatility is tthe reason why people trade cryptocuyrencies, Bitcoin cash inclusive. For traders, whose game is to make money on crytocurrencies, the upwards and downwards price moves is what they look out for. This upward and downward price movement determine the value of any crypto currency assets at a particular time. Nevertheless, volatility isn’t so great for anyone trying to use crypto as currency. As with fiat hyperinflation, it’s difficult to set prices or make economic plans when the value of money itself is in significant fluctuation. So if you earn or buy Bitcoin cash BCH, how can you make sure your assets is protected and secure in value? This is where stablecoins is useful.
What are stablecoins?
Stablecoins are cryptocurrency designed to maintain a steady crytocurrency price. Since volatility is one of the most major drawbacks of cryptocurrency, it was therefore necessary to create a stable cryptocurrency, one whose price is tied to a pre-existing “real world” asset.
There are several stable coins which ate largely manage to maintain price parity with fiat currencies; primarily the US Dollar. Example of stablecoins is Tether (USDT), the most valuable stablecoin.
Why are Stablecoins needed?
If your goal is to make profit with your Bitcoin cash BCH assets, utilizing stablecoin may not be right for you. Think of it why would you want to buy a coin designed to never go up in value?
Stablecoin is good for merchants or traders who find them extremely useful for transferring funds between exchanges to reduce the high fees and long delays associated when moving money internationally via bank wires, though stablecoins on its own also offer a reliable store of value.
Stablecoins enables traders and investors to exchange their cryptocurrency to a fiat currency with a steady value, without leaving the crypto ecosystem. Exchanging BCH to a stablecoins while the price is high helps provide a stable storage value for assets, allowing the user to then transfer to fiat in smaller amounts at their own leisure, without worrying about the value of their coin changing. Thiscould be considered as locking the market rate.
The disadvantages of using stablecoins
The “stability” of a stablecoins do not come without a cost, most of thesetablecoins are tied to the traditional banking system with a centralize control. With this they are subject to failure, fraud, seizure, and many other problems which Bitcoin cash BCH was developed to avoid. Therefore, while stablecoins usually display price stability, their absolute stabilit and continued existence is doubtful, as it rests upon the good mercies of banks and regulators.
Stablecoins may appear as an exact solution to volatility problems, nonetheless, in practice they’re hardly used for anything other than holding or transferring value on or between exchanges. As it’s already so easy for merchants to accept fiat (via credit card, bank transfer, PayPal, etc.) it doesn't makes much sense to accept fiat in stablecoins which must again be converted back into fiat at additional cost and time before witwithdrawing to bank account. Truth is that as cryptocurrency volatility decreases, so will the need for stablecoins.
Conclusion
Seeing the upward and downward movement of BCH, one would be tempted to want to lock up its market rate as at the time the price goes higher, but if you think of making gain with your assets the best is to allow it float. A lock up assets do not increase in value.
Think carefully before going for stablecoins.
Well explained. I've been trying to understand more about stable coins since I heard from another user here that swapping bch to stable coins is a good way to escape volatility. This one was explained clearly. Thank you.