What does Anchored Currency Mean (What is Anchoring Effect)?

08/20/2023 07:29 • Tech Trends • 84 views

Anchored currency refers to a stablecoin. It shares similar attributes with fiat currencies, stocks, or other traditional financial assets, such as a fixed price, liquidity, and trading volume.

Typically, the term “stable” implies a new type of virtual commodity or technology specific to a particular purpose minted on a blockchain network. Without these characteristics, its value cannot be maintained. (Bitcoinist)

What is the Anchoring Effect

Editor’s note: This article is from Cointelegraph China (ID: CoinTelegraphChina), author: TURNER WRIGHT, authorized to be reproduced by Odaily Planet Daily.

Every transaction on the Bitcoin network generates value at a fixed price. Due to its decentralized nature and the increasing on-chain activities, the issue of high transaction fees has been alleviated in recent weeks. The “anchoring effect” is a new theoretical model. By definition, “the price is determined by a specific asset/token,” which means it is related to others. What is the “anchoring effect”? When we consider Bitcoin as a currency, there are usually some stability factors: “supply = market demand * quantity of supply.” Therefore, when we take into account types of economic or political events, we often mention “limited liquidity in supply,” “scarcity,” and “scalability” (such as availability and speed). Over time, this concept has become increasingly popular.

To explain why Bitcoin can be called an inflation hedge tool (e.g., yield curve) and viewed as another form of investment, two reasons need to be addressed: first, its scarcity; second, its ability to accommodate the demand for various digital assets; and finally, because it is backed by a new system that will ultimately make it an alternative solution in the real world. If Bitcoin as a new type of digital currency has a larger market size, there will be a larger user base. However, there is still a long way to go to achieve this because it is still in its early stages and has not yet fully matured.

For Bitcoin, the most obvious issue is its price volatility: When you purchase BTC, your position becomes imbalanced and unavailable. This is why they are not affected: When BTC falls, most investors may sell their Bitcoin to offset losses. Conversely, they hope to profit from the growth in Bitcoin supply or at least hold it long enough for BTC to reach over $100,000.

This article and pictures are from the Internet and do not represent aiwaka's position. If you infringe, please contact us to delete:https://www.aiwaka.com/2023/08/20/what-does-anchored-currency-mean-what-is-anchoring-effect/

It is strongly recommended that you study, review, analyze and verify the content independently, use the relevant data and content carefully, and bear all risks arising therefrom.

What does Anchored Currency Mean (What is Anchoring Effect)?

What is the Anchoring Effect

Recommended articles