There are always two sides to a coin. You can't have both sides at a time. The same also goes for business. It's either a business thrives or collapses which makes it Paramount for a wise business person to prepare for any eventualities that may occur in the business especially in a situation where the business collapses. It won't be difficult for the business to resuscitate if there is a backed up plan. This can also be termed as insurance.
In cryptocurrency trading, there is high risk because of it volatility. Cryptocurrency is a form of asset that needs to be" insured" so that there won't be a total loss of the asset. What's is an asset? In every business, there are resources that are valuable and can be easily monetized. It could be fixed or current asset. Cryptocurrency is a form of asset to an investor because
- It can be used as a medium of exchange for the procurement of goods and services.
- It can be saved and sold at a later time with huge profits. Despite the prospect of crypto trading, it also involves a lot of risks. One of the ways to deal with the risk involved in investing in cryptocurrency is to backup your Crypto assets with the use of stable coin.
What are stable coins? Stable coins can be explained as a form of digital insurance put in place to protect Crypto assets. Stable coins as coined from the word stable; means the coin that is used to maintain resistance to the volatality nature of Crypto assets. Stable coins were developed to address the high price fluctuation in the price of unbacked Crypto assets. Stable coins are digital unit of value that depend on stabilization tools to maintain a stable value of Crypto assets and other official currency.
However, the stable coin itself poses some adverse effects to the Crypto economy as a whole.
- It lacks legal certainty
- Operational resilience.
Appropriate regulations, supervision and general oversight need to be adopted before stable coins pose a risk to financial stability in the economy and smooth running of the payment system which may lead to lack of confidence by the investors. A regulatory measure should be put in place to cater for data privacy, consumer protection and market integrity
In conclusion, stable coins are very valuable and indispensable but needs to be regulated in such a way that it doesn't pose a threat to the Crypto currency market and economy.
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