Explained: What Are Stablecoins, The Asset Rocking Crypto Market?

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Stablecoins have a market cap of around $170 billion.Most cryptocurrencies have a major problem with price volatility, but one sub-category of coins is designed to maintain a constant value: stablecoins.As cryptocurrency prices plummeted this week, with bitcoin losing around a third of its value in just eight days, stablecoins were supposed to be isolated from the chaos.But an unexpected collapse in the fourth-largest stablecoin TerraUSD, which broke from its 1:1 dollar peg, has brought the asset class under renewed attention.Here's what you need to know:What Are Stablecoins?Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.They attempt to maintain a constant exchange rate with fiat currencies, for example through a 1:1 U.S.

dollar peg.How Important Are They?Stablecoins have a market cap of around $170 billion, making them a relatively small part of the overall cryptocurrency market, which is currently worth around $1.2 trillion, according to CoinMarketCap data.But they have surged in popularity in recent years.