About stablecoins The sad reality in the bear market
The phrase “stablecoin” inspires great trust in you. Stablecoins, however, might indicate everything but stability in light of recent events, which is the sad truth. The Luna/UST fiasco, in which UST was depegged, served as the catalyst for events. As a result of the Dominic effect, Luna also decreased to less than 1 penny. Following this, the depegging continued as numerous coins started to lose value and never regain it.
Stablecoins are not 100% safe as the name would suggest otherwise
According to Coinmarket.com, there are currently 132 stablecoins on the market, and fewer than half of them are tied to the dollar (worth between $0.99 and $1.00). This demonstrates that the bulk of investors that purchased lesser or less well-known stablecoins that offered significant returns lost money.
The first thing that comes to mind when we consider stablecoin is how it can support a reliable source of income. But most of the time, they are just empty promises.
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The stablecoin wasn’t made to withstand 20% APY, according to the developers themselves, who admitted this after the UST fiasco. They were yet compelled to accept the amount in order to keep the situation appealing to investors. And we all witnessed what had occurred.
We might discover a lot of similarities among the stablecoins that have lost their peg if we examine the majority of them. They might either use exclusive algorithms that promise stability, as UST did, or provide extremely high APYs to entice investors.
For instance, USDD was fashioned after UST/LUNA and offered returns of up to 12% annually. The stablecoin previously lost its peg but was able to restore the $1 price.
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What should a novice crypto investor do?
Avoiding smaller coins with high APYs is the simplest method to avoid a stablecoin scam. The likelihood of anything going wrong is low if you invest in the top 3 stablecoins, such as USDT, USDC, and BUSD. Again, it is not completely safe, but it is a thousand times better than smaller coins.
Second, avoid using dubious platforms to try to get high returns with these coins. While an XYX company might offer 12% in returns on USDT deposits, Binance may only provide 6-8%. The XYZ company may not genuinely be a fraud, but the greater the return, the greater the risk.
What do you think about stablecoins losing their ties to the dollar left and right? Tell us in the comments section below. And do tell your friends about our content if you find it to be informative.
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