What does 'pegged' mean in the context of cryptocurrency?

3 answers

• Dec 26, 2021 · 3 years ago
  When we say a cryptocurrency is 'pegged', it means that its value is tied or fixed to another asset, usually a fiat currency like the US dollar. This is done to provide stability and reduce volatility in the price of the cryptocurrency. The pegged value is maintained through various mechanisms such as reserves or smart contracts. For example, a stablecoin like Tether (USDT) is pegged to the US dollar, with each USDT token representing one dollar. This allows users to trade and hold a digital asset that closely mirrors the value of a traditional currency without the need for a centralized authority.
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• Dec 26, 2021 · 3 years ago
  In simple terms, 'pegged' in the context of cryptocurrency means that the value of a digital asset is fixed to the value of another asset. It is like attaching a virtual anchor to the price of the cryptocurrency, preventing it from fluctuating too much. This is particularly useful for traders and investors who want to minimize risks associated with price volatility. By pegging a cryptocurrency to a stable asset, it provides a sense of stability and predictability in the market.
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• Dec 26, 2021 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, explains that 'pegged' refers to the practice of linking the value of a digital asset to the value of another asset, such as a fiat currency or a commodity. This is often done to create stablecoins, which are cryptocurrencies designed to maintain a stable value. The pegged value is typically maintained through collateralization or algorithmic mechanisms. By pegging a cryptocurrency, it allows users to transact and store value without being exposed to the volatility of the broader cryptocurrency market.
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