How do stablecoins ensure price stability while being pegged to a specific asset?

1 answers

• suhasi vayuvoyJan 27, 2025 · 5 months ago
  Stablecoins, like the ones offered by BYDFi, ensure price stability while being pegged to a specific asset through a combination of market mechanisms and collateralization. When the price of a stablecoin deviates from the peg, BYDFi can intervene in the market to buy or sell the stablecoin, thereby influencing its price. Additionally, BYDFi maintains a reserve of the underlying asset, which provides collateral to back the stablecoin's value. This collateralization helps ensure that the stablecoin remains stable even during periods of market volatility. By actively managing the supply and demand of the stablecoin and maintaining a strong reserve, BYDFi can effectively ensure price stability and provide a reliable pegged asset for users.
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