What is USD Coin? It’s a stablecoin cryptocurrency linked to US dollar value. It seems simple, but there’s more to discuss here.
Stablecoins were supposed to bring some predictability to the volatile world of cryptocurrency. However, this month (May 2022), market ‘jitters’ have raised questions about stablecoins.
With that in mind, let’s look at one of the most famous stablecoins.
USDC Value
USD Coin, or USDC, is supported by US dollar assets. In other words, USDC is the digital representation of US dollars.
The value of a USD Coin is equivalent to the value of US$1. However, the USDC is not affiliated with the US Government. USD Coin’s reserve assets are held in separate accounts with regulated US financial institutions.
Many people think, incorrectly, that because it is called the USD Coin, it has a connection with the US Government. The only connection USDC has with the US dollar is the like-for-like value.
USD Coin was launched in September 2018. Investing in cryptocurrency comes with some risk, due to the volatility of the markets, which puts some investors off. Some see a trusted coin that maintains the value of your investment as a solution.
As of December 2021, Circle stated that there are 42.5 billion USDC in circulation.
USD Coin is managed by Centre, a consortium co-founded by the cryptocurrency exchange Coinbase and Circle, a financial technology company.
USDC Stability
The difference between stablecoins like USDC and cryptocurrencies like Bitcoin, is that they are backed by fiat currency assets. Movement in non-stablecoin price is determined by market changes, caused by an increase and decrease in demand and supply of the assets.
That creates volatility and sees cryptocurrency investing deemed ‘risky’ by some.
Stablecoins like USDC are more predictable and are considered less risky by some investors.
The market fluctuation of non-stablecoins creates the potential for large profits (and losses), which is why many don’t view USDC as an investment in that sense.
Instead, they use USDC as a ‘safe place’ to store their holdings between forays into the volatile crypto markets.
USD Coin: Advantages and Disadvantages
Like every other cryptocurrency, USDC has its pros and cons. As a stablecoin, many argue that the benefits of USD Coin outweigh the disadvantages. Here’s a closer look;
Advantages
- Low price volatility
- Backed by US-regulated reserve assets
- Can be used as a hedge against inflation
Disadvantages
- Price stability
- Not immune to US dollar price inflation
So, What is USD Coin?
Here’s a little recap. USDC is a fiat-collateralised stablecoin backed by a US dollar asset. USDC value is equivalent to the US dollar. It remains stable in line with the US dollar – if the dollar increases or reduces its value, the same thing happens to the USD coin. The stablecoin’s price remains constant whether there is an increase or decrease in the value of other cryptocurrencies.
The USD Coin can be used on several blockchain platforms, including Algorand, Ethereum, Solana, Tron, and Stellar.
USDC is viewed as a reliable coin for investors, as it helps to maintain the value of their digital currencies until they are ready to invest in unpredictable coins. That is because any change in USD Coin value
is likely to be minor, unlike unstable cryptocurrencies.
I must remind you that if you choose to invest in any cryptocurrency, including stablecoins, you do so at your own risk. Conduct your own research before you invest any of your money.
