A portfolio manager wants to include a stablecoin in a diversified crypto portfolio to reduce overall volatility. What is the key characteristic of stablecoins that makes them suitable for this purpose?

They are backed by the full faith of the government

They maintain a stable value relative to a reference asset

They are immune to market crashes

They offer high yields through staking

A trader wants to hedge against a potential cryptocurrency market crash. They plan to move a portion of their portfolio into a stablecoin. Which stablecoin characteristic is most important for this hedging strategy?

The stablecoin's low transaction fees

The stablecoin's integration with a popular wallet

The stablecoin's ability to maintain its peg during market stress

The stablecoin's high staking yield

Which risk is associated with the custodian holding the reserves of a fiat-collateralized stablecoin?

The risk that the stablecoin will be mined out

The risk that the stablecoin's algorithm will malfunction

The risk that the stablecoin will be delisted from all exchanges

Counterparty risk that the custodian may become insolvent or mismanage the funds

A hedge fund wants to use stablecoins for hedging but is concerned about the risk of de-pegging. They are evaluating a fiat-collateralized stablecoin with a history of brief de-pegs during market stress. What is the most effective way to mitigate this risk?

Avoid all stablecoins and use Bitcoin for hedging

Rely on the stablecoin issuer's insurance policy

Use only algorithmic stablecoins because they are more resilient

Diversify across multiple stablecoins and maintain a small cash buffer

A cryptocurrency trader wants to hedge against the volatility of Bitcoin while keeping funds within the crypto ecosystem. They plan to use a stablecoin as a trading pair. What is the main benefit of using a stablecoin for this purpose?

It provides a stable store of value that can be used to exit positions without converting to fiat

It eliminates all counterparty risk

It increases the volatility of the trading portfolio

It guarantees a profit when trading against Bitcoin

EC-CouncilBlockchain Fintech Certification

Domain 6Objective 3

Stablecoins and Their Use Cases in Finance BFC Practice Questions (Page 8)

Part of the Digital Currencies and Cryptocurrencies domain, which makes up ~15% of our current practice bank.

49questions here

10free pages

8concepts

Questions 36–40

36application · medium
A portfolio manager wants to include a stablecoin in a diversified crypto portfolio to reduce overall volatility. What is the key characteristic of stablecoins that makes them suitable for this purpose?
Select an answer first
37expert · hard
A trader wants to hedge against a potential cryptocurrency market crash. They plan to move a portion of their portfolio into a stablecoin. Which stablecoin characteristic is most important for this hedging strategy?
Select an answer first
38foundation · easy
Which risk is associated with the custodian holding the reserves of a fiat-collateralized stablecoin?
Select an answer first
39expert · hard
A hedge fund wants to use stablecoins for hedging but is concerned about the risk of de-pegging. They are evaluating a fiat-collateralized stablecoin with a history of brief de-pegs during market stress. What is the most effective way to mitigate this risk?
Select an answer first
40application · medium
A cryptocurrency trader wants to hedge against the volatility of Bitcoin while keeping funds within the crypto ecosystem. They plan to use a stablecoin as a trading pair. What is the main benefit of using a stablecoin for this purpose?
Select an answer first

Finished these 5 questions?

Review the revealed explanations, or continue through the curriculum.

Next 5 questions →Back to BFC

Free Basic Practice is a study aid with revealable answers — not a scored exam. Examers.io is independent and not affiliated with or endorsed by EC-Council. “BFC” is a trademark of its owner, used for identification only.