What Is A Stablecoin? Here’s Where And How To Buy Them
Main Takeaways:
Stablecoins bridge the world of cryptocurrency and fiat currency together as their prices are tied to a reserve asset like the US dollar or gold.
Stablecoins have also been very popular as a way to store and trade value in the crypto economy.
Find out all you need to know about stablecoins and how you can purchase them with Binance.
In a market that is no stranger to volatility, sometimes stability is a much appreciated and needed asset. A cryptocurrency with a twist, stablecoins combine traditional asset stability with digital-asset flexibility.
Cryptocurrencies like Bitcoin and Ethereum offer many benefits, including decentralization, intermediary-free transactions and much more. However, one of cryptocurrency's key drawbacks is that they are notoriously volatile, meaning the prices are unpredictable and have a tendency to fluctuate wildly. Although the exact mechanisms vary from one coin to the other, backed stablecoins are built to be somewhat resistant to that volatility, so you won’t see significant price changes.
In a nutshell, stablecoins tackle price fluctuations by binding the value of cryptocurrencies to more stable assets like fiat currencies. In this article, we will take a deep-dive into what stablecoins are, their importance, benefits in the crypto space and the popular stablecoins available on the market.
Trusted by millions worldwide, Binance is home to the world’s largest global cryptocurrency exchange by trading volume and user base. Sign up for a Binance account to start trading stablecoins and other tokens today.
What Are Stablecoins
Stablecoins are a class of cryptocurrencies that attempt to offer price stability relative to unpegged cryptocurrencies like Bitcoin. Stablecoin market value is pegged to the value of a “stable” reserve asset like the US dollar or gold. For example, BUSD, USD Coin (USDC) and Tether (USDT), are all backed on a 1:1 basis with the US Dollar. One BUSD or USDC or USDT is the same as one US dollar.
Why Are Stablecoins Important?
1. Stablecoins offers stability in a volatile market
Stablecoins provide the same value to crypto investors and traders as fiat currency offers to participants in traditional markets—stability. For instance, while traditional investors might choose to allocate portions of their portfolios to cash or treasury bonds when volatility rises, crypto investors can move to fiat or gold-backed stablecoins. Collateralized stablecoins that rely on fluctuating assets such as other crypto assets can be risky so always DYOR (do your own research).
2. A quick and efficient medium that lets crypto traders move fast in the crypto market
Crypto investors or traders often turn to backed stablecoins under a volatile market climate. Turning to stablecoins allows them to stay in the cryptocurrency market and enables them to move faster between trades without waiting days to transfer from fiat money.
3. Stablecoins bring more liquidity and volume to the crypto market
The stable and efficient nature of fiat or gold-backed stablecoins inspires confidence in the crypto market. Meaning more people are now more comfortable with engaging in the market. The increased market participation has also grown the trading volume and market capitalization. This leads to more liquidity, which makes the crypto market more efficient. Increased efficiency also brings more accurate asset pricing, resulting in fairer asset prices,tighter bids and ask spreads.
What Can You Do With Stablecoins?
Minimize volatility
Assets such as backed stablecoins can give risk-averse buyers and sellers certainty that the value of their tokens won’t rise or crash unpredictably in the near future. For both beginners and seasoned traders, the stable and certain nature of backed stablecoins makes them a good asset to hold on to or invest in, especially during the bear market seasons.
Earn interest
Traders and investors can earn interest with some fiat or gold-backed stablecoins via lending and staking. When you lend stablecoins, you can earn interest payments from borrowers. Staking is the process by which crypto transactions are verified. And by putting your coins at stake, you have the chance to earn rewards. The more coins you stake, the more you can potentially earn.
At Binance, we offer a suite of products to suit your financial needs. For crypto investors, you can choose to buy stablecoins such as BUSD and earn compound interest via Binance Earn. Learn how to do so here. In addition, you can make recurring purchases for USDT, BUSD via Recurring Buy.
Easily and quickly transfer assets
You don’t need a bank account to hold stablecoins, and they’re easy to transfer with fast processing and low transaction fees. In addition, stablecoins can be transferred quickly internationally, including to places where the US dollar may be hard to obtain or where the local currency is unstable.
What Are The Most Popular Stablecoins?
Stablecoins are designed to be a reliable safe-haven asset in a volatile market. Below we’ve listed the most popular coins you can consider adding to your crypto portfolio:
BUSD, at price of $1.00 and $ 6.95B market cap
TrueUSD (TUSD), at price of $0.99 and $ 1.22B market cap
* These prices are a reflection of 24 May 2022’s prices.
* This list is ranked according to market cap and does not constitute a recommendation or endorsement by Binance to buy or sell any currency.
Where And How Can I Buy Stablecoins?
Looking to purchase stablecoins? Get started in minutes on Binance, the largest cryptocurrency exchange in the world. There are different options available for buying cryptocurrencies at Binance. You can either make a fiat deposit or use a debit/credit card.
Step 1: Make a fiat deposit via an e-wallet transfer or bank transfer on Binance. Be sure to check the available fiat channels for desired currencies. See our in-depth guide on How to Deposit USD via SWIFT.
Alternatively, top up your Binance cash wallet with other currencies to exchange the stablecoin of your choice.
Step 2: Purchase stablecoins through a user wallet purchase or directly with credit/debit card.
Conclusion
Backed stablecoins are an essential part of the crypto economy; they are designed to be a reliable medium of exchange for traders and investors. Moreover, fiat or gold-backed stablecoins are a core component in strengthening the crypto economy, especially when the market is bearish.
Ready To Start Your Cryptocurrency Adventure With Binance?
Start by signing up for a Binance.com account or download the Binance crypto trading app. Next, verify your account. Once you’ve verified your account, there are three main ways to buy cryptocurrencies on Binance using cash: you can buy crypto with cash from Binance via bank transfer, card channels or e-wallets options.
Buy BUSD, BNB and cryptocurrencies with a Debit Card, Credit Card, or via Bank Transfer
Linking your debit card, credit card, or bank account (available in many regions) is one of the easiest ways to buy Bitcoin and more than 100+ cryptocurrencies.
This article was edited on July 27, 2022.
Disclaimer: Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made above should not be considered financial advice.
Read the following articles for more information:
(Support) How to Buy Crypto with Debit/Credit Card on the Website and the App
(Blog) Do You Buy Crypto with Card or Card Deposits? What's The Difference?
(Academy) What are Stablecoins?
(Academy) What is BUSD?