Invest in stability on ZebPay

These are uncertain times. Stock markets from around the world are on a topsy turvy ride. The Federal Reserve, America’s central bank, has increased interest rates yet again this month by the biggest amount since 1994 to combat record-high inflation. Food and fuel prices around the world are high. From the lofty and vertiginous valuations, Bitcoin, the oldest crypto asset is now trading at around $20,000. The crypto market, too, has entered a “bear” territory. What can an investor who has entrusted faith in the world of digital assets do at a time when the market itself is skittish?

Not all is doom and gloom. Much like in the conventional world, which calls for having a “balanced portfolio” of debt and equity, the crypto world is no different. You might recall your financial adviser telling you not to put all your eggs in one basket. For instance, if you have, say, Rs. 100, split it intelligently. If the stock market crashes, you still can survive the fall because of some diversification in the debt market, which offers convervative returns, but holds its own during a market downturn.

Much like on those lines, in the world of crypto assets, stablecoins have a reputation to hold fort when all about them are losing theirs.

So what is a stablecoin?

A stablecoin is a type of cryptocurrency that is typically pegged to an asset, like the dollar or another government-backed currency. As the name suggests, it is “stable” when compared to other virtual assets.

This stability is not just on paper. To insure such coins from market gyrations, stablecoin issuers usually hold assets in their reserves in the form of short-term securities. These may be in the form of cash or government debt. This is to make good on the promise to investors that if they pledge $1 or say, Rs. 100 of their money, the currency’s worth will not be depreciated when the market chips are down.