Are Stablecoins the solution in tough financial times


2020 has brought unprecedented financial turbulence. The fallout from the coronavirus has left many economies around the world struggling amid lockdowns and restrictions on businesses.

As the year slowly comes to a close, questions still remain about the viability and timeline or a vaccine, and when a sense of normalcy and everyday life can return without fears of a ‘new wave’ of the virus.

Markets across the world have certainly been affected by global instability. The stock market has seen growth due to the actions of entities like the Federal Reserve. The cryptocurrency world has also seen booming prices in some instances due to the rise of decentralized finance (DeFi) and other projects.

But overall, many across the world are still in a tough financial spot.

High unemployment rates and restrictions on bars, restaurants, and other places where people gather has left many with little or no way to make an income. Large swaths of people have been forced to live on unemployment, savings, or find odd jobs to get by.

As the cryptocurrency world continues to grow in popularity and influence, many are curious about the ability of stablecoins like to serve as a beacon of stability.

Backed by an asset like fiat currency, precious metals, or over-collateralized virtual currencies, stablecoins are a popular investment choice for people looking to protect their portfolios against volatility.

They have also accrued curiosity since they are seen as a more accessible way to introduce everyday people to cryptocurrency. Their stable nature (backed by an asset), makes them a legitimate medium of exchange, especially in the eCommerce world.

But are stablecoins a viable solution in tough financial times? Does their built-in price floor and lack of volatility make cryptocurrencies like these a legitimate place to park assets in uncertain times?

Keep reading to understand why the answer is yes.

Stablecoins Open Up The Economy For The World’s Unbanked

Stablecoins are innovating and developing at a rapid pace. One of their biggest advantages is providing a way for millions of unbanked populations to be able to save, send, and receive money from friends and family.

People who do not have access to a bank account are some of the world’s poorest people.

Traditional financial institutions require identification and documentation that many of the global poor lack. Infrastructure is also needed for people to access a traditional bank, something that might be nonexistent or sparse in some parts of the world.

The lack of identification also makes it impossible for the world’s unbanked to build a line of credit that can open up large-scale loan opportunities to help improve quality of life.

Banking with stablecoins can be done in a seamless and instantaneous manner, with far less (or even no need) for identification. Since stablecoins have a built-in price floor of the underlying asset, people can buy, sell, and trade coins on a daily basis without having to worry their assets will become worthless due to a major price swing.

Stablecoins provide opportunities for millions of unbanked people to build wealth and exchange with friends and family to improve their financial situation. They can also serve as a check against hyperinflation in economies that have experienced turmoil, like Venezuela.

Stablecoins Encourage Economic Activity

One of the benefits of stablecoins in tough financial times is their liquidity. They can be easily sold or traded for other digital assets and can be used as a stable medium of exchange for transactions.

The price of a stablecoin will never go below the spot price of the underlying asset. A coin could rise above if it proves to be popular and heavily traded.

Some stablecoins, like those backed by precious metals, can be bought in fractional amounts. This means coins backed by bullion like gold or silver can be bought with any amount of money.

The ability to purchase fractionalized shares of bullion opens up precious metal investing to a wider range of people who might not have the financial ability (especially in tough economic times) to invest in an ounce, or more, of a precious metal.

As a result, a larger amount of people is able to store finances in a stable asset that provides protection in difficult economic circumstances.

Stablecoins Are A Solution

In tough economic times, stablecoins are a legitimate economic solution for people who are looking to preserve their portfolios against inflation or volatility.