What is a Stablecoin and Should I Invest in One?

Many game changers have come in and rocked the world. Though they’re few and far between, companies have come through and essentially reinvented the wheel. This is what Tether is trying to do with what they’re calling a stablecoin. A lot of people aren’t happy about stablecoin, and evidence suggests that this new way of looking at cryptocurrency will do more harm than good.

What is the Stablecoin Market?

The idea behind the stablecoin market is that values won’t fluctuate much if the value of a coin is tied to a real world asset, like cash. Tether is a controversial company that has created a stablecoin exchange where one of their coins is equal to one US dollar. This market is heavily enforced at a one for one exchange. The value won’t grow — you’re merely turning one thing into another.

How is it Different From the Cryptocurrency Market?

The Cryptocurrency market as a lot of variables. The value of a traditional cryptocurrency isn’t backed by anything. The market does what it’s going to do. While this sometimes means losses, it also means the potential for tremendous gain. Since the value of the coin is free to move up and down, particularly when it’s impacted by the amount of people who invest and the amount of companies that accept it as a form of payment, it’s a little more of a gamble. Investing in cryptocurrency is a lot like investing in a new startup company. It’s exciting and less predictable.

Be Careful

Cryptocurrency and real money aren’t the same thing — when you use cryptocurrency to pay for a real world good or service, it’s a little more like bartering. The danger in stablecoin comes from the fact that coins are being treated as equal or exact to actual cash or real world commodities. These coins can’t be traded back for what you got for them, and if there’s nothing you can do with them, you’ve essentially thrown your money away. Use extreme caution when dealing with stablecoins. Better yet, just steer clear.