There has long been controversy about the reliability of the collateralizing reserves regarding certain stablecoins (i.e., that the stablecoin’s liabilities are higher than its reserves). USDC is a stablecoin outlier in disclosing precise data regarding its assets and liabilities. USDC’s reserves are held in safe assets that should retain their value, such as cash and U.S Treasurys. The graph below shows USDC’s collateral reserves as of August 2022-at $54 billion, the coin’s reserves are slightly greater than its liabilities of $53.8 billion. USD Coin (USDC) is a prime example of a collateralized stablecoin. Whenever the holder of a stablecoin wishes to cash out their tokens, an equal amount of the collateralizing assets is taken from the reserves. Collateralized StablecoinsĬollateralized stablecoins maintain a pool of collateral to support the coin’s value. The two most common methods are to maintain a pool of reserve assets as collateral or use an algorithmic formula to control the supply of a coin. Stablecoins are typically pegged to a currency or a commodity like gold, and they use different mechanisms to maintain their price peg. dollar-based stablecoin is a token that will reside on a blockchain and always trade for one dollar. So another way to think about stablecoins is as a tokenized version of a fiat currency. dollar or the British pound, don’t see this level of price volatility. Over the past month, investors have seen around a 4% daily change in the value of BTC.įiat currencies, such as the U.S. Even the top cryptocurrency- Bitcoin (BTC)-is subject to significant fluctuations in value. They aim to offer all the benefits of crypto while attempting to avoid rampant volatility.Ĭrypto’s total market capitalization can rise and fall by billions of dollars a day. Stablecoins are a type of cryptocurrency designed to maintain a stable price over time, pegged to the value of an underlying asset, like the U.S.
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