Stablecoins and Their Role:
Let’s delve into a clear definition of stablecoins and understand why they are the cornerstone of a well-rounded investment portfolio.
Definition: Stablecoins are a category of cryptocurrencies designed to maintain a stable value relative to specific assets, such as the US dollar, other fiat currencies, or commodities. Examples of robust and time-tested stablecoins include USDT, USDC, and DAI.
The Role of Stablecoins in an Investment Portfolio:
Stablecoins serve as a reliable foundation for an investment portfolio due to their ability to provide a stable anchor in the dynamic world of cryptocurrencies. Investors leverage stablecoins for various purposes:
- Risk Hedging: Stablecoins, unaffected by high volatility, prove to be an ideal tool for hedging investment risks.
- Quick Fiat-Crypto Bridge: Functioning as a rapid “bridge” between fiat funds and cryptocurrencies, stablecoins facilitate conversions to fiat on a bank card and vice versa in less than 10 minutes through P2P exchanges with minimal fees.
- Market Flexibility: The majority of asset transactions on centralized exchanges occur in pairs with stablecoins, both in purchases and sales.
Key Takeaway: The paramount significance lies in the fact that, as participants in the market, our goal is not only to preserve but also to grow our capital.
Main Thesis: Stablecoins play a leading role in an investment portfolio, enabling effective risk control throughout the investment period through strategic planning and goal-setting for asset acquisition and liquidation.
Important Note: The fundamental principle to grasp is the necessity to always uphold purchasing power in the market. Put simply, in your portfolio, regardless of the market cycle or situation, there should be no less than 20-30% allocated to stablecoins.
For optimal investing and risk management, we strongly recommend conducting an in-depth study of market cycles and determining a proportion that aligns with the recommended percentage of stablecoins in the portfolio based on the prevailing market cycle.