What are the uses of stablecoins?

Stablecoins play a crucial role in the broader cryptocurrency economy, serving as a reliable bridge between volatile digital assets and the stability of traditional currencies. Since their value is pegged to assets like fiat currencies, stablecoins enable a wide range of financial uses, from daily trading to cross-border payments and decentralized lending.

Cryptocurrency Trading

Stablecoins are essential tools for cryptocurrency trading. They act as a stable unit of account, allowing traders to exit or re-enter positions quickly without the need to convert to fiat currencies.

By functioning as primary pairs across thousands of markets, stablecoins simplify portfolio management, reduce exposure to volatility, and help traders calculate profits and losses more accurately.

Lending and Borrowing in DeFi

In decentralized finance (DeFi), stablecoins are typically used as assets for lending and collateral.

Their expected value makes them ideal for borrowing and lending protocols, where price fluctuations can lead to liquidations.

Users can lend stablecoins to earn yield or borrow other crypto assets against their holdings of stablecoins, often without intermediaries.