Stablecoins are cryptocurrencies that are designed to have a stable value by pegging their value to another currency or financial instrument. They provide an alternative to the high volatility associated with popular cryptocurrencies like Bitcoin and Ethereum. Let's analyze each statement in detail:

Statement 1: Stablecoins are cryptocurrencies whose value is pegged to that of another currency or financial instrument.

This statement is correct. Stablecoins are a type of cryptocurrency that aim to maintain a stable value by pegging their price to another asset, such as a fiat currency (e.g., USD, EUR) or a commodity (e.g., gold). This pegging mechanism helps to reduce the price volatility typically associated with other cryptocurrencies like Bitcoin. By having a stable value, stablecoins offer a more reliable medium of exchange and store of value.

Statement 2: Stablecoins provide an alternative to the high volatility of the most popular cryptocurrencies.

This statement is also correct. One of the primary purposes of stablecoins is to address the issue of volatility present in cryptocurrencies like Bitcoin and Ethereum. While Bitcoin's value has experienced significant fluctuations, stablecoins aim to provide a more stable and predictable value. This stability makes stablecoins more suitable for various use cases, such as facilitating everyday transactions, remittances, and serving as a stable unit of account in decentralized applications.

Explanation of the correct answer:

The correct answer is option C, which states that both statements 1 and 2 are correct. Stablecoins indeed peg their value to another currency or financial instrument, and they also offer an alternative to the high volatility of popular cryptocurrencies. By providing stability, stablecoins aim to bridge the gap between traditional financial systems and the decentralized world of cryptocurrencies.

Stablecoins have gained significant attention and adoption due to their potential to combine the benefits of cryptocurrencies, such as fast and borderless transactions, with the stability of traditional assets. They offer a middle ground for individuals and businesses who want to leverage the advantages of cryptocurrencies but are wary of the price volatility associated with them.

Overall, stablecoins play a crucial role in the cryptocurrency ecosystem by providing a stable and reliable means of exchange and store of value. Their popularity is likely to grow as more individuals and businesses seek stability in their digital transactions.