So finally it has happened – after remaining stable for a looonnngggg time, the volatility of Bitcoin is now back with a bang. However, its return has not been as pleasant as many had wanted. Instead of going up after months of decline it has sharply gone down to touch the record low of 2018. It touched the $5,300 mark, sparking panic even among the staunchest believers of crypto. As they say, volatility is a double-edged sword.
Volatility has always been the key highlight of cryptocurrencies. Had it not been the volatility and steep rise in valuations of Bitcoin, the whole crypto scene wouldn’t have become as popular as it is today. But volatility goes both ways – up and down. In 2017 it was mostly going up, which led to fortunes being made. Now it’s looking set to take a free fall. Especially after today’s sharp decline in the prices of Bitcoin it’s looking that many major cryptocurrencies may lose 10% – 20% within a few hours. This is precisely the kind of volatility that people despise.
But it’s good for stabelcoins
The growing volatility has also given rise to the popularity and demand of stablecoins. The very point of stablecoins is to erase the volatility aspect of crypto tokens, which acts as a large barrier to entry for many investors who don’t like volatility. As a result, both retail as well as institutional investors are showing interest in HODLing them. For example, NexoBank, a cryptocurrency loans service, has embraced stablecoins by offering interest on deposits of some of them. Antoni Trenchev, the Co-Founder and CEO of Nexo, told Forbes magazine:
“The volatility typically associated with the crypto space is both a blessing and a curse. Without the huge gains of Bitcoin and some of the altcoins, crypto would not have attracted so much attention, which ultimately is the powerhouse for adoption of crypto in real-life. Unfortunately, volatility works both ways so the corrections are heavy as well. I think that is the foundation for the rise Stablecoins – the search for price stability. They also come with the ease of transferability and cost-efficiency, which we all like with regards to crypto assets.”
Speaking about the future of stablecoins, Trenchev said that both Bitcoin and stablecoins will have their role to play in the world of finance. Besides that, stablecoins also have one more use case – they can be used to enable ultra-cheap cross-border transactions! This, combined with their tokenized nature and lack of volatility, is going to drive the demand for majority of stablecoins in future, Trenchev concluded.