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Pegged Cryptocurrency

A pegged cryptocurrency is a digital currency whose value is linked to the value of another medium of exchange, such as a bank-issued currency or gold. Once an exchange rate is established between the two, the cryptocurrency’s value fluctuates in the same direction and to the same degree as its pegged medium. Since cryptocurrencies are known to heavily fluctuate in value, users often peg their cryptocurrencies to other currencies to preserve their financial worth. This helps decrease the overall risk of monetary loss on their initial investment. For instance, Tether tokens (a type of stablecoin) are pegged to the U.S. dollar. This means that an individual Tether token always holds the value of $1. On the other hand, when a cryptocurrency is pegged to a specific type of asset such as gold, its value is directly affected by the value of the underlying asset.

What Small and Midsize Businesses Need to Know About Pegged Cryptocurrency

Although pegged cryptocurrencies are relatively new, SMBs in the eCommerce industry can use them to facilitate transactions with international customers who don't have a bank account, thus opening their business to new markets. Since the value of pegged cryptocurrencies is linked to the value of a stable bank-issued currency or underlying asset, SMBs don’t have to worry about financial loss even if the value of their cryptocurrency fluctuates.

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