Stable coins and bitcoins are cryptocurrencies. Cryptocurrencies are digital currencies, which use complex mathematical equations and computer science for security and verification. These are not underwritten or governed by any government or large approved body but are global across digital networks. This leads to an element of uncertainty and hence risk.
Bitcoins
Bitcoin is a type of electronic cash. It is decentralized and is not linked to any central bank or administrator. Their price is volatile, disruptive and game changing. Among others, these are also used for illegal transactions and theft from the exchange is a common problem. Bitcoin transactions are verified by an electronic device which is attached to a network and recorded on a public ledger called blockchain. It was started in Japan in 2009. The coins can be used in the exchange of services, products, and currencies.
Stablecoins
Stable coin started in 2011, is also a cryptocurrency and it is attached to a stable asset like gold or fiat currency. Price value of the stable coin will remain constant as it is issued by a central authority. These are potentially served as the backbone of the financial applications on the blockchain. However, stable coin cannot be audited and is prone to failure. Trading in these is relatively more stable.
In spite of the great risks, big money is made or lost in volatile markets and therefore attract many investors. Transactions are required for short-term investment and stability is required for holding. Thus, most people maintain a platter of investment modes and keep shifting between them to maximize gains and minimize risk.
Each mode of investment has its strengths and weaknesses and investors apply their knowledge and risk-taking ability to spread their portfolio over the options. That is why we usually see that when one form of investment takes a tumble, another form grows to balance as investors migrate.
While the concept of cryptocurrency does not generate much confidence, there is a big market for it mainly because it circumvents many international rules of transacting actual currency. It is there to stay and new forms may crop up too. Acceptance by governments may also increase over time and who knows the future.
The stable coin and bitcoin have their own niche and one will not pose any major challenge to the other. There is enough space for both to survive until some international law comes in the way.
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