Why 4RX includes stablecoins in its Index

In building the 4RX algorithmic based price index token, we included both constant and variable coins to drive and maintain the overall value of the 4RX token. Variable coins are defined as coins with a value increasing or decreasing over time where constant coins, or stablecoins, are coins holding the same value over time. Examples of stablecoins are USDC, USDT and DAI, which all are pegged to the value of $1 USD and neither increase or decrease in value.

How do stablecoins benefit 4RX? Let’s take a look at both upward and downward market trends:

Upward trending market

When an upward trending market is detected by Arima, an algorithm powering 4RX index portfolio, the balance and distribution tend to shift more towards variable coins in order to capture the value of an increase in market prices. Stablecoins are still included in the index during an upward trending market but with less weight than coins “going to the moon” or increasing in value significantly.

Downward trending market

When a downward trending market is detected by Arima, the 4RX token is able to adjust to favor stablecoins, although not entirely. Why does this matter? By algorithmically shifting distributions of the base price index composition to stablecoins, the value of the 4RX token is less exposed to experiencing market downturns or volatility.

For more information, visit: https://4rx.finance