Stablecoins Will Do More Than Just Reduce Crypto Price Volatility

Maybe this is implied by the name, or maybe it's just a misunderstanding of crypto market dynamics when compared to other more traditional financial markets, but stablecoins by themselves won't smooth the turbulent fiat value of crypto assets.

In my mind, the most promising and often overlooked application for stablecoins is their utility as on-ramps for assets moving from traditional financial markets into crypto.

Stablecoins allow people to take advantage of traditional financial tools like access to loans and credit, but also take advantage of things that cryptocurrencies do well, such as sending money quickly and cheaply, creating economies around smart contracts, and powering a slew of decentralized financial applications.

So instead of thinking of stablecoins as some kind of giant ballast that will keep the crypto ship steady, think of them instead as a port - a place for people to load and unload assets.

Fiat-collateraliteralized stablecoins: These are crypto assets that are held usually in a one-to-one relationship with fiat currency.

Put simply, users stake a certain amount of crypto and then borrow stablecoins against that collateral at a fixed rate.

The challenge with crypto-backed stablecoins is that they can still be vulnerable to the major market shifts of crypto more broadly.

Algorithmically controlled stablecoins: This is a newer model of stablecoin that constantly adjusts its supply, based on demand, to maintain a constant price.

Reducing the friction between the crypto and fiat financial systems will help increase access to new kinds of assets and opportunities, which is critical for projects and companies currently building in the crypto space.

Stablecoins and stable-assets also represent a tremendous opportunity for people so far left out of crypto to find a viable use case and entry point.