Learn more about how stablecoins make money in this article? Introduction to the profit model of stablecoins

It can solve the risks caused by the huge volatility of some general cryptocurrencies, and can also solve some problems such as asset on-chain, asset circulation, micro-payment, etc. Its main purpose is to ensure the stability of its value , and reduce friction costs and increase asset liquidity.

How to make money from stablecoins?

We take USDT as an example to introduce how to make profits from stablecoins. You have to make money by issuing coins, otherwise why would you create a USDT out of thin air? Enough support? There are many benefits to issuing USDT, which can be said to be good or evil.

Given that USDT is a perfect pool for storing funds, money becomes tokens and will have the inertia to stay in the Bitfinex exchange. This is indeed the case. Bitfinex is the leader in spot trading, friends. It is not difficult to think about the clues. When the U.S. dollar comes, liquidity will come, and exchange fees will naturally come. Bitfinex can of course make money by relying on USDT.

Of course, Tether can also rely on the volatility of USDT to make money. Although USDT is known as a stable currency, in fact, the premium in various currency markets is still very obvious, especially when the market comes, there will often be a fluctuation of 0.5% to 2%. The greater the market fluctuations, the greater the price fluctuation deviation. The bigger! When injecting USDT into the market, these fluctuations can bring considerable profits to Tether... (In fact, some users on the market have already done this, depositing 1 million USDT each time, and then wait for a big rise or fall. When the time comes, sell it at a premium, wait for the market to calm down, and then wait for the price of USDT to stabilize and recover it. The cycle starts again and again. Although there is only a small profit each time, the money seems to be very stable)

Compared with USDT, like GUSD or Other stablecoins like PAX are more government regulated and more closely tied to fiat currencies, making them seem less likely to break away from their peg. The profit methods of these stablecoins seem to be limited to the above two.

What if Tether is not a legal and compliant company with no ethics and is purely for making money? Then this matter is very troublesome... It is equivalent to having the ability to "print unlimited money" and has transformed into an energy-rich "dollar money printing machine". Just issue as many dollars as you want! It is even possible to directly pump up the price of Bitcoin by injecting “fake dollars” into the market. Moreover, bitfinex can also use this to manipulate the spot and futures markets and harvest leeks like crazy. From this perspective, Tether (or befinex) has both the ability and motivation to do evil. If it prints money like that, there is absolutely nothing we can do about it.

Introduction to the Role of Stablecoins

As mentioned earlier, Bitcoin’s price fluctuates considerably, making it difficult to be considered a stable store of value. Since the supply of Bitcoin is extremely limited, with an upper limit of 21 million, it cannot achieve true stability like a fiat currency. One way to solve this problem is to adjust the supply of the token according to the prevailing economic conditions to make it more stable. This is also the significance of stablecoins entering the cryptocurrency ecosystem.

By being tied to an indicator or value, they help protect against large swings and, more importantly, they serve as a hedge against downside risk. They can be used to cover daily expenses and help maintain the overall stability of your investment portfolio. Currently, there are many stablecoins, but not many serve their true purpose. In August, one well-known stablecoin, Tether, which is pegged to the U.S. dollar, ended up falling 15% — to 85 cents.

This is caused by a large number of people selling their Tether for Bitcoin. Since then, Tether has been dogged by rumors and has been shrouded in a shadow of suspicion. Tether is probably the most controversial topic in the entire cryptocurrency space. From the audits they promised and failed to deliver, to their sudden stop of dollar withdrawals, they were ultimately called the bane of the market.

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