What Are Stablecoins and Why Are They a Common Diversification Asset for DAOs?
Stablecoins are cryptocurrencies pegged to a stable asset, typically a fiat currency like the US Dollar. They are a common diversification asset because they offer low volatility, providing a reliable store of value and liquidity for operational expenses.
They serve as a critical buffer against the extreme price swings of the broader crypto market.
Glossar
Store of Value
Asset ⎊ The concept of 'Store of Value' within cryptocurrency, options, and derivatives fundamentally assesses an asset's capacity to maintain purchasing power over time, resisting inflation and preserving nominal value.
Collateralization Ratio
MarginRequirement ⎊ The Collateralization Ratio quantifies the amount of posted margin relative to the notional value or exposure of a leveraged position, serving as the primary metric for assessing margin adequacy.
DAOs
Governance ⎊ DAOs, or Decentralized Autonomous Organizations, represent a novel application of smart contract technology to organizational structure within the cryptocurrency ecosystem, extending into options trading and financial derivatives.
Diversification
Allocation ⎊ The strategic distribution of capital across a spectrum of assets ⎊ cryptocurrencies, options contracts, and financial derivatives ⎊ represents a core tenet of risk mitigation.
Stablecoins
Peg ⎊ Stablecoins represent a class of cryptocurrencies designed to maintain a stable value relative to an external reference asset, typically a fiat currency like the US dollar.