Binance USD (BUSD) - stablecoin of the largest cryptocurrency exchange in the world

As a rule, Stablecoins are to be cryptocurrencies that reflect the value of a given fiat currency in a 1: 1 ratio. Some of them, however, are accompanied by controversy, but stand out among them Binance USD (BUSD) - fully covered in US dollars and publishing a monthly report by external auditors.

We continue the cycle of the Forex Club portal, in which we analyze and describe the largest, highest-valued, most interesting, most developmental, advanced and also the most controversial cryptocurrency projects around the world. Today it's time for Binance USD - a stablecoin that is virtually risk-free. 

What are stablecoins

Cryptocurrencies are associated with with rapid price changes, the possibility of making an equally quick profit and the emotions associated with it. But there are also cryptocurrencies, which by definition are a complete contradiction of these stereotypes - this stablecoiny. 

Their task is to keep the price constant in relation to the chosen fiat currency - in this case the US dollar. This allows investors to hold assets with low volatility on blockchainie without leaving the cryptocurrency market. For example, at a time when the market is not following the direction they were betting.

What is BUSD

One of such stablecoins is exactly BUSD. It is a joint project of the company Paxos - supporting technology for stablecoins (it has, for example, PAXG based on gold) and Binance - the largest cryptocurrency exchange in the world. It all regulates New York State Department of Financial Services.

Importantly, the number of BUSD tokens still corresponds to the number of US dollars held in the reserve, which was not so obvious in all stablecoins. 

The undoubted advantage of this token is the fact that it exists on three different blockchains: Ethereum, Binance Smart Chain and Binance Chain. So you can exchange your coins between the most popular blockchains.

The whole thing is complemented by the fact that Paxos publishes regular audits by an accounting firm Withum, showing the reserves of the US dollar corresponding to the supply of BUSD in a 1: 1 ratio. 

How the price of stablecoins is determined

Stablecoin is supposed to correspond to the price of USD, but it is also a cryptocurrency, like any other, the valuation of which depends on the size of demand and supply. So how is it kept in check? This task arbitration traderswho react quickly to price changes. When the BUSD price starts to drop below $ 1 for 1 BUSD,  they immediately start buying BUSD in large quantities. So the price goes back to 1: 1 and traders can convert BUSD to USD on the Paxos platform. When it is higher than $ 1, it is not profitable to buy it, so the price naturally drops.

The use of stablecoin BUSD

Stablecoins work primarily in a period when investors want to temporarily leave the cryptocurrency market and assume that they will return to it. Then they do not have to bear the costs of converting the tokens into fiat currencies. 

Many cryptocurrencies do not have pairs between themselves on each exchange, so if we do not use a decentralized exchange pool, often you just need to convert cryptocurrency X to stablecoin to buy cryptocurrency Y for it.

BUSD is also treated by many investors as an investment in ... the US dollar, because the currencies of some countries - especially those involved in crises - struggle with galloping inflation and are losing value in relation to the USD.

Binance USD cryptocurrency quotes

As of November 03.11.2021, 9, there are 843 USD tokens in trading valued at USD 944 apiece, which translates into a capitalization of over USD 924 billion. They can be traded on 400 cryptocurrency exchanges! The peak of trading took place on November 25, 2019, when the BUSD price briefly reached USD 1,17.