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Understanding Stablecoins and Volatile Cryptocurrencies: A Complete Overview

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Defi Drive
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Table of contents

📓 Introduction

In the world of cryptocurrency, tokens can be broadly categorized into two main types: Stable and Volatile.

🪙 Stable tokens

Stable tokens, including USDT, USDC, DAI, BUSD, and TUSD, typically have a consistent value closely tied to the value of the US dollar.

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How do stable token work? - Stable tokens maintain stability by pegging to a reserve of assets, such as fiat currency, cryptocurrencies, or other commodities. These reserves provide a stable value reference, and the tokens can be redeemed or exchanged for the underlying assets, ensuring price stability. Additionally, some stable tokens use algorithms and smart contracts to adjust their supply, further contributing to their stability.
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Tip: To learn more about each token, kindly refer to the Coingecko links provided below.
USDThttps://www.coingecko.com/en/coins/tether
USDChttps://www.coingecko.com/en/coins/usd-coin
DAIhttps://www.coingecko.com/en/coins/dai
BUSDhttps://www.coingecko.com/en/coins/binance-usd
TUSDhttps://www.coingecko.com/en/coins/true-usd

🪙 Volatile tokens

Volatile tokens such as BTC, ETH, MATIC, and BNB are subject to fluctuations in value that can be influenced by various factors such as supply and demand, market sentiment, and technological developments.

BTChttps://www.coingecko.com/en/coins/bitcoin
ETHhttps://www.coingecko.com/en/coins/ethereum
MATIChttps://www.coingecko.com/en/coins/polygon
BNBhttps://www.coingecko.com/en/coins/bnb
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USDT is the most widely supported among stable tokens due to its use as a stablecoin in many cryptocurrency exchanges and trading platforms. However, in cases where a specific chain does not support stable tokens, individual chains may create their stable currency to facilitate transactions and maintain price stability.

✌️ Conclusion

In conclusion, navigating the digital currency landscape requires understanding the differences between stable and volatile tokens. Stable tokens offer security and predictability, making them ideal for transactions and preserving value. Volatile tokens, on the other hand, present greater risk and potential for significant gains, appealing to investors seeking higher returns.

CryptocurrencyStablecoins cryptotokencryptobasicsweb3basic