Pretty much all cryptocurrencies today are highly volatile and highly correlated. As a matter of fact, all of the money currently invested in the cryptocurrency market is completely speculative, due to the cryptocurrency platforms’ constant struggle to scale their technologies to the point where they could support millions of users (like payment processors are able to handle). Suffering from price volatility, cryptocurrencies often do not make the perfect fit for the needs of the investors.
Stablecoins prove to be a promising alternative as they complement crypto features with the stability of the underlying asset. The main application of stablecoin is to minimize the losses caused by volatile cryptocurrencies. Without mentioned scalability maintained for far more users, stablecoins are essential tools that traders are beginning to utilize more and more.
The types of stablecoins
Stablecoins can be classified as asset-backed and non-asset-backed (seigniorage). The first type can be backed by fiat, other cryptocurrencies, or commodities.
Fiat-backed stablecoins are crypto tokens associated with the value of a specific fiat currency. These tokens have their value fixed at a 1:1 ratio to a fiat currency, for example, USD or Euro.
Cryptocurrency-backed stablecoins set up other cryptocurrencies such as Ethereum as collateral. The main advantage, comparing to fiat-backed coins, comes from their decentralized nature as all the network members participate in the lifecycle of the issued stablecoins which provides higher liquidity.
Commodity-backed stablecoins are backed by other kinds of interchangeable assets, such as precious metals like gold and silver, but there are also stablecoins backed by oil, real estate, and baskets of various precious metals.
Non-collateralized stablecoins make use of a Seigniorage Shares system. These stablecoins employ algorithms to control market value. Algorithms can change the supply volume of coins to maintain their price.
The CUPRUM Coin use case
The main thing that differentiates CUPRUM Coin from alternative products comes from the fact that the underlying asset in the form of ultra-fine and nano Cu powder protects the value of the holdings. Namely, as this very rare and high valued material is required for the industries of the future, it is unlikely to see its value inflates or is exposed to market volatility risk like is the case with other asset-backed products. In other words, the price of CUPRUM coins is unlikely to drop below its value. Due to mentioned industry demand, the price is set to grow above the current market value. To conclude, CUPRUM Coin enables traders to have a safe investment plan, allowing them to reduce the risks without having to leave the crypto ecosystem.
By Darko Parun