A stablecoin AMM is usually the coin in which transactions in a platform are going to be carried out. These coins are typically a pegged asset. AMM platforms tend to use these coins to make transactions in the platform much easier to process. We are going to go over a couple of examples that make the use of these stablecoins a good idea.
If you got lost on the pegged asset reference, we want to make sure that we explain that. A pegged asset in crypto terms is usually a token whose value is tied to the value of another commodity. Many of these pegged assets are tied to the value of the US dollar for example. There’s a very good reason to do this. In essence, what the platform is doing is processing all of the transactions within its system in one currency. From there though, you’re usually going to be able to withdraw other currencies to a crypto wallet if you see fit. Those withdrawals could be made in ETH or other cryptocurrencies. In short, the purpose of these coins is to create a sense of stability within the platforms.
Do Stablecoins Increase in Value?
Yes, and no. Really the purpose of these coins isn’t necessarily to use them as a way to hold a long term position looking for gains at the other end. Although, it could be an idea that would work for certain people. Let’s say that you want to access an AMM platform like Saddle Finance. To be able to operate on the platform you’ll likely have your initial investment converted to their stablecoin. Since these coins are pegged assets the value of the coin will follow the increases or decreases, for that matter, that the value of the asset that it’s pegged to has.
For example a USDT, a popular stablecoin, is always going to be worth the same as one US dollar at any given time. If you take that into account then we would have to say that stablecoins are perfectly capable of seeing their value increased. That can be a problem for some investors. Particularly if your main currency isn’t the one that the stablecoin is pegged to. For Indian investors if the Indian rupee loses ground against the dollar it could make it more difficult for them to acquire a stablecoin like a USDT.
We’ve mentioned that for some people holding stablecoins may be a good way to do business. For the most part they are more of a transitory currency. That you’re ultimately going to exchange for another currency to be able to withdraw your winnings, or your investment in an AMM.
All AMM platforms should have a way to withdraw your funds on the account. That is potentially going to be done through a digital wallet or to your local bank account. The withdrawal process could certainly vary depending on what type of platform you’re using. While we are on the subject, this may be an aspect that you want to account for when picking your trusted AMM platform that you want to work with.