Tether (USDT) and USD Coins (USDC), two stablecoins, are losing their grip on the crypto market. These dollar-denominated tokens have been lowered because of a rally at crypto behemoths and consequent purchases on altcoins.
Tether fell from third place earlier this month to fifth place on the market cover table in late August. The USD Coin fell from seventh to ninth place in the Coinmarketcap ranking.
Analysts argue that this does not imply that they are losing trust in the crypto sector. So far, their popularity has taken a toll.
Stablecoins are cryptocurrencies that are linked to assets such as the US dollar. Like other cryptos, their prices have remained constant and unchanging. According to Ishan Arora, Partner, Tykhe Block Venture, a crypto hedge fund, stablecoins are always identified at the same price because that is their function.
Stablecoins were first utilized as a bear market hedge, according to Hitesh Malviya, founder of itsblockchain.com. “When you wish to book a profit or wait to initiate a new position, you can convert your positions into stable currencies. Stable coins are used by traders and investors to invest in DeFi, NFTs, token trading, and altcoin trading.”
The US dollar is the most common benchmark for stablecoins, however many are also identifiable in other fiat currencies like the euro and yen. “Because fiat currencies are identifiable in underlying assets like gold or FX reserves that act as collateral, their valuations in cryptocurrency markets remain unchanged,” said Darshan Bathija, Vauld’s co-founder and CEO.
Stablecoins are one of the safest currencies in crypto, according to market analysts, and some staking pools pay more than 10% interest when you deposit your solid coin in their pool.
“Some stablecoins also utilize algorithms to regulate the supply and demand of a coin, similar to how a park stores its coins,” Batheja of Vauld explained.
Countries might create their own digital currencies based on the stablecoin concept, according to Arora of Tykhe. “Stablecoins are not a form of investment. They’re used to prevent you from making a profit ” he said.