This is how stack coins work

The price of the cryptocurrency LUNA, which was in the top 10 by market value a few days ago, has crashed to almost zero along with its stablecoin UST. Last week, the original Terra token was worth about $ 85. A few days ago, the situation changed drastically, and at the time of writing, the cryptocurrency is trading at $ 0.0003.

UST is a stablecoin based in the Terra blockchain. But let’s think for a moment: if the aforementioned currency belongs to the “stable” currency class, why has the price dropped so drastically? Why are stack coins called that?

Also read: Is Terra’s failure a signal that algorithmic stack coins are not viable?

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What is a stablecoin?

Stablecoins are a class of cryptocurrencies that are more stable in price than non-fiat cryptocurrencies, such as Bitcoin. The price is directly linked to the price of classic assets, including management currencies (US dollars, South Korean won, etc.), precious metals (gold, silver) or natural resources (oil). For example, the largest stable coin in the world – Tether’s USDT – is trading at a 1: 1 ratio against the US dollar. While the price of other digital currencies is extremely volatile, stablecoins are in most cases correlated with the price of classic assets, and their price tends not to explode or fall immediately.

Also read: Stops operations on Terra blockchain as validators try to “rebuild” it

Why are stack coins needed?

  • Stablecoins is an island of stability in the ocean of volatility

Stablecoins have the same value for crypto traders and traditional market participants, while providing stability and balance. For example, in times of increased volatility, traditional investors can convert their assets into cash or bonds, and cryptocurrency supporters have the option of turning to stack coins to protect their portfolios.

  • Stablecoins are a fast and efficient way to trade

As discussed earlier in this article, cryptocurrency investors and traders often turn to stack coins during volatile market times. Buying stack coins allows them to stay in the crypto market and continue entering into new transactions without waiting for the transfer of fiat money for several days.

  • Stablecoins increase liquidity and volume of trade in the crypto market

The stability and efficiency of stablecoins inspires confidence in the cryptocurrency market, so more and more new players are coming in to mark their start in the booming industry. But how ?

Growth in the number of market participants increases the market’s trading volume and market value. In turn, this leads to greater liquidity, which increases the efficiency of the cryptocurrency market. Improved efficiency also enables more accurate asset pricing, leading to fairer asset prices and reducing the gap between supply and demand.

How can I use stack coins?

The nature of stack coins allows risk-averse investors to be confident that the value of their tokens will not change in an unpredictable way in a matter of moments. Therefore, the price reliability of stack coins suits both beginners and experienced traders and makes them a great asset to save or invest in, especially in bear market times.

Traders and investors can earn interest on stack coins through loans and strike. Loans are loans of stack coins in return for interest payments from the borrowers. that strike is the process that provides verification of cryptocurrency transactions. By entering your corners in strike, you have a great chance of receiving a reward. The more you deposit, the more you have the potential to win.

  • Transfer assets quickly and effortlessly

You do not need a bank account to store stack coins, so they are easy to transfer thanks to fast transaction processing and often very low commission. You can also quickly transfer stack coins to anyone corners around the world, including places where it is difficult to buy US dollars and where the local currency is volatile.

Which stack coins are the most popular?

Here is an incomplete list of corners the most popular ones that are worth having in your wallet:

  • Binance USD (BUSD) – 1.00 USD pr corner
  • Tether (USDT) – $ 1.00 pr corner
  • USD coin (USDC) – $ 1.00 pr corner
  • dai (DAI) – $ 1.00 pr corner

Conclusion

Stablecoins are an integral part of the cryptocurrency economy and provide a safe and reliable means of exchange for traders and investors. In addition, stack coins serve as a key building block to strengthen the cryptocurrency economy, especially when the market is bearish.

And as for UST stablecoin and LUNA cryptocurrency – in short, they have fallen victim to the current market conditions and geopolitical (and therefore economic) situation.

Also read: Citadel Securities and BlackRock deny involvement in UST collapse

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