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Crypto tokens and coins have a highly volatile nature which depends upon factors such as market conditions and the demand-and-supply of the cryptocurrency. The level of risk involved can be intimidating to some people. Enter stablecoins — a crypto asset class which has become an integral part of the ecosystem in the past few years. In particular, one subtype of stablecoins — the algorithmic stablecoin — utilizes technology to help automate the trading process.
This article will take you through the concepts of stablecoins and algorithmic stablecoins, their key features, and the different types of algorithmic stablecoins currently making their rounds in the crypto market.
A stablecoin is a type of cryptocurrency that offers better stability compared to its peers, as it derives its price from another asset’s value. This process of pegging a stablecoin to an underlying asset is the main reason for its growing popularity in the crypto world. Reports suggest that the total supply for stablecoins grew by 493%, from $5.9 billion in 2020 to more than $35 billion by the beginning of 2021. Meanwhile, stablecoin usage increased by 500% between Oct. 2020 and Oct. 2021.