The primary reason why several investors haven’t invested in cryptocurrencies is the market volatility associated with them. All cryptocoins investors faced unprecedented fluctuations in the value of their holdings last year because of the coronavirus pandemic and ensuing lockdowns.
Right now, people are extremely cautious when it comes to investing in cryptocoins. They don’t want to take any decision in haste. However, they can still invest in the best stablecoin, which is not only relatively stable but can also withstand the short-term market pressure.
The Meaning of Stablecoins
Stablecoins are a lot different from the conventional cryptocoins that are available online. All stablecoins are backed by fiat currency like the US Dollar or Gold. Thus, each stablecoin is backed up by the US dollar in equal proportion.
Stablecoins are intrinsically stable in nature. They are not subjected to high market fluctuations that other cryptocoins do. Stablecoins are now considered as the most balanced crypto asset, which reconciles the demerits of both fiat currencies like the US dollar and traditional cryptocoins. However, stablecoins can be still used by cryptocurrencies for making an online payment.
Traditional cryptocoins like Bitcoin (BTC), Ethereum (ETH), and others have seen massive ups and downs in their value in the past few months. But the value of stablecoins continues to remain more or less stable. That is why stablecoins have gained a lot of popularity in recent times.
Why Should You Invest in Stablecoins?
If you are interested in becoming a part of the crypto revolution without taking any risk, stablecoins are the right option for you.
When you invest in stablecoins, you shouldn’t accept exorbitant profits. They are specifically designed keeping in mind the needs and requirements of the cautious investors.
At present, Tether (USDT) is one of the most popular stablecoins in the crypto market. In the last three years, the value of tether has gone up by just 0.40%. Investors who are looking for long-term appreciation in the value of their digital assets should opt for stablecoins.
You can also lend your stablecoins to borrowers and earn interest on it. Also, you will earn a reward each time you lend your stablecoin to somebody else. However, you shouldn’t lend your coins to anybody unless you have gained considerable experience in this field.
Top 6 Stablecoins by Market Share
- Tether— $70-billion
- USD Coin—$32.5-billion
- Binance USD—$13-billion
- TerraUSD—$3-billion
- TrueUSD—$1.3-billion
- Pax Dollar—$945.5-million
Types of Stablecoins
Fiat currency-backed stablecoins: These stablecoins are fully stable. At any time, you can redeem your holdings and get the same exchanged in US dollars. Fiat-backed coins experience little to no market volatility even when there is turmoil in the crypto market. USDC, a stablecoin, is right now available at a 1:1 ratio. It means 1 USDC equals 1 $.
Cryptocurrency-backed stablecoins: These stablecoins are backed by specific cryptocoins. Since a particular cryptocoin is backing these coins, so when the cryptocoins face market fluctuations, there’ll be some fluctuation in the value of the stable coin as well. However, in most cases, the value of the backing asset is set to a specific range like $1 to $3. Thus, the stable coin’s value would remain in between the same range.
Gold-backed Stablecoins: These stablecoins work just like any other fiat currency backed by gold. Since these coins are backed by gold, these stablecoins remain mostly stable while protecting the investors from market volatility.
The Conclusion
Stablecoins are in high demand these days. Investors who want to invest in cryptocoins and get stable returns can go for stablecoins. It is liquid and decentralized while keeping your digital assets away from market fluctuations and volatility.
You can buy stablecoins of your choice by opening a digital wallet online. It hardly takes five minutes to get yourself registered on a digital wallet and start investing in your favorite cryptocurrency or stablecoins as per your wish.
You may be interested in: Gemini Earn supports GUSD stablecoin with 7.4% interest offered
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