The emergence of cryptocurrencies has made it possible for investors to process transactions more quickly and with lesser fees. The volatile market, on the other hand, makes it difficult to use cryptocurrency as a valid payment channel.
The solution to this issue lies in Stablecoins, which offer security against the volatility of cryptocurrencies. They are created with the intention of keeping a constant value while being linked to an underlying asset, such as a fiat currency.
Stablecoins are becoming an increasingly attractive outlet for investors and corporations who are interested in cryptocurrencies and this trend began relatively recently. These stablecoins, in contrast to other coins whose value moves in tandem with that of the underlying asset, are tethered to a less volatile asset.
WHAT ARE STABLECOINS?
Stablecoins are a type of cryptocurrency that have its value pegged to a financial asset, like the United States Dollar or the British Pound.
They are created with the intention of keeping their value ‘stable’ (thus the name), which allows them to circumvent the issue of volatility that has, up to this point, prevented cryptocurrencies from functioning as a trustworthy form of value storage.
Stablecoins represent, in some sense, a compromise between traditional (fiat) currencies and cryptos like Bitcoin and Ether. They provide the advantages of decentralization, such as privacy, speed, and security, but do so without the significant volatility that can be associated with cryptocurrencies.
BEST STABLECOINS TO INVEST IN
Below are the most pioneering and reliable stablecoins to invest in the crypto market right now:
- TETHER (USDT)
Tether is the most well-known and actively traded stablecoin. It was first introduced in 2014 and has since gained widespread popularity. Both its total market cap and the daily trading volume are heads-and-shoulders above other stablecoins in crypto.
Because Tether maintains sufficient reserves of fiat currency to support a value of 1:1, the price of each coin is pegged to the value of the fiat currency that it represents. Here, the pegged currency is the United States Dollar.
People and businesses now have the opportunity to effectively use fiat currencies on the blockchain thanks to Tether. This can be done either as a means of payment in its own right or as somewhere reliable to transfer funds away from volatile cryptocurrencies. Tether does not offer a way to speculate on price changes. Instead, it does this by giving people and businesses the opportunity to use Tether.
- BINANCE USD (BUSD)
BUSD is a recognized stablecoin that is 100 percent backed by the USD. Binance Exchange and the Paxos Trust Company worked together to establish this crypto asset and bring it into existence. This is an ideal option for hedging against the volatility of the market and entering the market without having to buy Ethereum.
There are a few standout characteristics that contribute to BUSD’s position as the runner-up on this list. The first benefit is that if you use it to make transactions on the Binance exchange, you won’t have to pay any transaction fees. Additionally, the fact that it can be used on Binance means that it can be traded for a wide variety of other cryptocurrencies.
- AUD token (AUDT)
AUDT is a stablecoin pegged to the value of the Australian dollar. AUDT is hosted on the Ethereum blockchain and backed by fiat reserves held by the issuing company. This enables traders to lock funds in a stable store of value while keeping them on the blockchain. Also quick redemption of tokens means you can easily convert tokens back to AUD. Licensed banking procedure means that your funds are safe and protected by a licensed bank.
It can be purchased through the crypto exchange platform TimeX. Through this service it is possible to invest in other cryptocurrencies with the Australian dollar. Which gives a lot more benefits to Australian users. You can also check the current XRP AUD price and start trading through crypto exchange service TimeX.
- USD COIN (USDC)
Along with Tether and Binance USD, USDC has been at the forefront of the stablecoin industry for the past few years since it was initially introduced in 2018. While Tether is the most popular stablecoin among traders, USDC has set up the most advanced infrastructure to allow users to transmit money around the world in a digital form.
The fact that USDC is significantly more open to scrutiny is another significant edge it may have over others. Its reserves are reviewed on a monthly basis by the accounting firm, Grant Thornton to ensure that the total value of its reserves is at least equivalent to the whole amount of USDC that is currently in circulation.
A lot of applications running on the blockchain are already set up to accept payments in USDC, and the cryptocurrency has made significant strides toward establishing itself as the stablecoin of choice for companies as well. It asserts that it has already received regulatory permission from a number of banks and that it is, at the very least, comfortably the “best of the rest” following Tether.
- TRUE USD (TUSD)
Another stablecoin available for investment is True USD, and its value is pegged to the value of the US dollar. It was introduced in 2018 and is a brainchild of the Trust Token platform, which is equivalent to a hub of decentralized finance that provides financial services in crypto.
In addition to these financial services, the Trust Token platform makes a variety of stablecoins available that are each pegged to a distinct currency. Stablecoins are thus available in the form of the British Pound (TGBP), the Australian Dollar (TAUD), the Canadian Dollar (TCAD), and the Hong Kong Dollar (THKD).
You can get rewards in True USD and Trust Token by lending your tokens. The Trust Token app provides access to this feature, which functions in a pattern similar to the receipt of interest payments on funds held in a savings account by the user.
- DAI (DAI)
Dai (DAI) is currently the only ‘decentralized’ stablecoin that is accessible on the market. This means that it is algorithmic in nature and is not supported by any authority that is centralized.
It uses asset – backed debt in the form of Ether (ETH), which is the native crypto of the Ethereum network. DAI is “soft-pegged” to the USD. The absence of a precise peg is one of the limitations of the Dai system. Since you can’t truly predict where the open rate is going to be, using Dai as a loan currency might be an extremely tough endeavor for financial institutions.
One of the primary advantages that stablecoins have over other cryptocurrencies is the ability to be lent out. Despite this, the Dai has shown a tendency to maintain its fixed exchange rate with the US dollar, even in times of extreme market volatility.
HOW TO KNOW THE BEST STABLECOINS
The stablecoin market is not overly complicated, and it is generally recommended that investors put their money into the most well-known coins. This is due to the fact that you are looking for stability and volume in a stablecoin, and you are not interested in the possibility that its value will increase.
Despite this, there are always emerging new projects, many of which have the potential to function in novel ways. Coins such as Ampleforth and Reserve Rights offer entirely unique strategies to stabilize the value of a coin. These strategies are highly reliant on blockchain technology and digital assets.
This article should make it easier for you to decide which stablecoins are the best and educate you on the distinctions between them. It is probable that the most popular stablecoins will continue to see positive trading volume trends. This is because an increasing number of investors are shifting their focus to coins that are backed by some sort of assets and give clarity when it comes to what those assets are.
When market sentiment is pessimistic, we are also likely to witness an increase in the number of investors staking stablecoins in order to earn a consistent dividend while waiting for the bear market to roll over.
This does not represent complete financial advice but should serve as a guide for investment purposes.