Stablecoins reduce price volatility by pegging their value to stable underlying assets like fiat currencies (e.g., USD) or commodities (e.g., gold).
This backing creates confidence in their value stability.
Elimination of Other Options:
A: Stablecoins use blockchain technology.
B: Pegging can occur in other currencies, not just USD.
D: Stablecoins are designed for liquidity, contrary to being illiquid.
References:
ICWIM Module 6: Explanation of cryptocurrency types and characteristics.
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