Stablecoins are a new and exciting way to take your cryptocurrency investments into the future. They offer you peace of mind by providing price stability, which means that these currencies will never lose their value over time as many other crypto assets can due to unstable values caused by FOMO, the “fear of missing out.”
During the last few years, the prices of cryptos have skyrocketed, with Bitcoin (BTC-USD) reaching new highs. This is great news for those who invested early on. Cryptocurrency values have risen, some much more than others. But it seems this growth wave has only begun. The cryptocurrency world changes very quickly, with new advancements and cryptos being added everyday.
These momentous rises carry a high degree of risk for investors. It is also hard to know what cryptocurrencies are worth at a given time and whether they will be worth anything in the future.
Any central authority does not back cryptocurrencies, so their value can fluctuate dramatically from day to day. There is also no regulatory body overseeing them, making it difficult to determine if the currency will be worth anything in the future. That’s where stablecoins come in.
The idea of stablecoins is to provide an alternative way for people sensitive about price fluctuations to invest in the space. They can buy into currencies that have their values tied to another asset, like the U.S. dollar or even other cryptocurrencies, so they don’t see their investment go down in value every day due to big market swings.
- Tether (USDT-USD)
- Binance Coin (BNB-USD)
- TrueUSD (TUSD-USD)
- TerraUSD (UST-USD)
- USD Coin (USDC-USD)
- Digix Gold Token (DGX-USD)
- Dai (DAI-USD)
Best Stablecoins to Buy: Tether (USDT)
Tether is a new digital asset tied to the U.S. dollar that allows people to send money worldwide without fees. By exchanging their dollars for Tether tokens, holders can use them in any way they want — buy goods, invest in cryptocurrency, etc. It is an innovative idea that has the potential of changing how we think about money forever.
The first such coin on the list rightfully sits atop of its category as one worth looking into for those who want an additional layer to protect their investments from volatility — or even just someone trying not to lose any money during market downturns.
The Tether Operations Ltd division of Tether provides financial stability for investors by maintaining an account balance at all times, which never drops below required minimums set out through external sources such as banks or other fiduciary institutions. You can always exchange your coins for an equal amount of USD and have no risk or losses to your portfolio. Simply open a bank account with a trusted brokerage.
Binance Coin (BNB)
Binance USD is an ERC20 token issued on the Ethereum (ETH-USD) blockchain. It is one of the most traded tokens on Binance and has a number of utility functions that can be used for cryptocurrency trading. It has a fixed value against the U.S. dollar. You can use it for transactions in any place where Ethereum is accepted.
Binance USD (BUSD-USD) is certified by the New York State Department of Financial Services. It has significant implications for investors of BNB. Paxos, BUSD’s issuer, has to prove its ahead of schedule in meeting its contractual obligations and has enough reserves to cover every single one of the tokens that were awarded to the public.
Second, regulators watch over these asset backing assets and make sure they don’t go broke from being too risky or inflationary (which could lead people away from buying them).
The last requirement is that Binance Coin must hold all reserves in financial instruments. The majority of these are Treasury and FDIC-insured bank accounts.
Although the tokens are not a part of any corporate freeholds, they are also not part of any bankruptcy filings. This means that they are safe and secure, even during changing circumstances.
Best Stablecoins to Buy: TrueUSD (TUSD)
TrueUSD is a stable coin with a decentralized governance system. It’s based on the USDT protocol, which TrueBit developed.
TrueUSD is tied to the U.S. dollar. This means that, at any given time, one USD worth of TrueUSD will always be worth $1. Tim Draper and Roger Ver are wealthy entrepreneurs who invest in initial coin offering (ICO) projects like this one.
It uses the same Proof of Stake algorithm as Ethereum (ETH-USD). What does this mean for investors? It means they can buy into an ICO with confidence because there’s no need to worry about volatile markets. Actual U.S. Dollars back TUSD in vaults around America, so you know it will always be worth something, even if inflation increases over time like many predict it might happen due to recent inflationary concerns around the world.
The idea behind TrueUSD is to provide stability for cryptocurrencies by ensuring that their value doesn’t fluctuate too much. To do this, they have established regulations on how many coins can be issued and where those funds come from, all while staying within certain parameters set out in law.
TrustToken doesn’t charge any trading fees on their TUSD, which is nice for investors. Tokens are often associated with decentralized technology. But their platform isn’t fully decentralized yet. The regulatory actions in question will affect TUSD holders.
Terra is a decentralized database marketplace that uses blockchain technology and has a secure, transparent way to manage data.
TerraUSD is the proprietary cryptocurrency that fuels the Terra ecosystem. You can use it to pay for the use of resources on the Terra platform, such as computation power and storage space. The currency also allows users to trade with other users on the network, which means they can earn money by selling their unused resources or buying other people’s new resources at a discount.
Terra has an ambitious goal of being both price-stable and growth-driven. The Terra protocol is compatible with their native cryptocurrency, Terra. It is a platform that provides low-risk profits to users when the price of TerraUSD goes up in value. If the price of TerraUSD falls at any point, users lose a significant part of their investment.
Tera USD is an emerging cryptocurrency. The innovative design of the TerraUSD currency allows it to be easily integrated with other coins and tokens, creating more UST when its price exceeds $1 while also contracting in value below that threshold.
It appears that TerraUSD’s goal is to keep the price steady against other currencies and it seems to be working.
Best Stablecoins to Buy: USD Coin (USDC)
The USDC is a stablecoin created by decentralized blockchain platform MakerDAO. USDC is a digital currency that uses the U.S. dollar as an additional security measure. Hence, it’s gaining traction with financial institutions.
USDC combines the functions of cryptocurrencies and fiat currencies. The goal is to make it easier for investors everywhere to invest without having to worry about fluctuations or wildly fluctuating prices.
USDC is tied to the USD, just like many other coins on the stablecoins list. The coin’s volatility rankings currently stand slightly higher than Tether, but remain low risk compared with many others out there today.
Digix Gold Token (DGX)
Unlike other gold coins, the Digix Gold Token is built to be more than just an investment. It can also serve as a medium of exchange and protect investors from volatility in traditional markets by providing them with security when trading cryptocurrencies or fiat currency.
The DGX token, unlike other coins on this list of stablecoins, is redeemable for one gram of gold. This means that there’s no way to exchange these crypto currencies into fiat currency and vice versa. Risks associated with a cryptocurrency’s fiat counterpart vary from one currency to another, determining its value. However, DGX is a little bit different.
When the price of gold fluctuates, so does that of DGX. Though it makes this currency more volatile and causes investors to lose money on their investments if they buy when prices are high rather than low (as people often do with stocks), many still believe in hard assets like precious metals because there’s a history behind them — they’ve always been valuable.
Best Stablecoins to Buy: Dai (DAI)
MakerDAO is one of the most innovative companies in today’s crypto space, with their whitepaper describing how they use Ethereum to maintain stability on their coin.
This clever system keeps the Dai stable coin at a 1:1 ratio with U.S. dollars. And because deposited coins worth more than $1 can be withdrawn and returned for free (and they never go down in value), MakerDAO has found success maintaining its peg despite fluctuations seen throughout other projects’ attempts at creating cryptocurrency-backed assets.
The early days of MakerDAO were exciting to some investors, with a $15 million investment from Andreessen Horowitz in less than one year.
Investing in stable coins like Dai protects you from the volatility of cryptocurrency. Despite their volatile prices, these cryptocurrencies have a low risk of losing value. They’re unlike other risky investments.
On the publication date, Faizan Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.