Stablecoins are cryptocurrencies that are pegged or tied to a stable external asset. The most popular stablecoins are tied to fiat currencies like the U.S. Dollar, precious metals like gold, or at times even to other cryptocurrencies.
Stablecoins are also known to maintain a reserve of the asset they’re pegged to. For example, a stablecoin tied to USD with 5,000,000 coins in circulation will have the equivalent cash in a bank holding.
This acts as collateral, and if an investor sells stablecoins, its equivalent is taken out of the reserve. Unlike other cryptocurrencies, it also means that an asset backs this with more than just perceived value.
These features allow stablecoins to avoid the unpredictability and volatility associated with other cryptocurrencies.
The different types of collateral that stablecoins are pegged to include:
- Fiat currencies like the USD or Turkish Lira
- Precious metals like gold and silver
- Other cryptocurrencies
- Debt instruments like bonds
You’ll notice that the value of popular stablecoins equals USD 1 or close. However, the collateral opens up some stablecoins to certain risks.
Since the collateral is often stored in a bank, there’s counterparty risk (3rd party risk). There may even be trust-based issues stemming from whether the stablecoin has a reserve as it claims to.
In many ways, it’s the marriage of modern-day blockchain-based cryptocurrencies and the old-school banking system.
While this may make it undesirable for many crypto purists, it makes stablecoins an excellent stepping stone for new investors to enter the world of cryptocurrencies without taking an unprecedented risk.
Stablecoins appeal to crypto investors because of factors like:
- Stability in cryptocurrency
- Safety of being backed by real-world assets
- Comparably low fees
- A certain degree of regulation (fiat-based)
Now that you know everything about stablecoins, it’s time to move on to the list of the most significant and most stable cryptocurrencies in 2022 by market cap from the world of stablecoins.
List Of 5 Most Stable Cryptocurrency For Investment In 2023
This list of the most stable cryptocurrencies is sorted by market cap because it is considered an accurate indicator of the value and worth of stablecoins, as most of them are pegged to the USD with a value of 1.
Tether
Tether (USDT) is one of the oldest stablecoins in the crypto market, and it was launched in 2014. Tether is also the 4th most valuable crypto by market capitalization and one of the most stable cryptocurrencies.
Tether is pegged 1 to 1 to the USD, meaning that the value of one Tether USDT equals USD 1. Tether claims to have cash reserves and cash equivalents to back every USDT on the market.
USD Coin
USD Coin (USDC) is also pegged 1 to 1 to the USD. It was introduced in 2018 and is managed by Circle and Coinbase through the Centre Consortium they co-founded together.
USDC is the 9th most valuable cryptocurrency in the world. USD Coin claims a mix of cash and cash equivalents and U.S. Treasuries in reserve to back every USDC in circulation.
Binance USD
Binance USD (BUSD) is a stablecoin offered by the largest crypto exchange in the world, Binance. BUSD is approved by the New York State Department of Financial Services (NYDFS).
BUSD equals 1 USD by design, and investors may incur relatively low charges when buying or selling it. Binance USD is the 19th most valuable crypto in the world.
TerraUSD
TerraUSD (UST) is a stablecoin offered by Terra. It is designed to track the value of 1 USD, which is 1 to 1 pegged to the USD. TerraUSD is the 31st most valuable cryptocurrency by market cap.
TerraUSD’s primarily used for earning returns with Luna, Terra’s staking and governance reward token system. Other use cases include making returns through arbitrage opportunities.
Dai
Dai (DAI) is a stablecoin, unlike others on the list. Dai is pegged to the USD but is backed by ether tokens. Dai was introduced in 2015 by MakerDAO and is the 36th most valuable crypto by market cap.
The value of digital assets known as stablecoins are pegged to an external asset, such as gold or fiat currency, leading to their early reputation for reliability. But that stability was questioned when the third-largest stablecoin, TerraUSD (UST), abruptly “de-pegged” from the U.S. dollar in May, eventually plunging to less than a cent on the dollar, triggering the collapse of its sister token, LUNA.
In addition to raising questions about risk transparency, “stablecoins have become a major concern for governments who fear that they will eventually pose serious competition against the sovereignty of their national currencies,” says Will Evans, managing director of the Americas for the crypto exchange CEX.IO.
As cryptocurrency investors, including a growing number from emerging markets, dip their toes back into the diverse pool of stablecoins, some may wonder how secure these investments are. Many experts agree that they are here to stay in some form. Here are seven of the best stablecoins for investors to look at now.
Source
https://money.usnews.com/investing/term/cryptocurrency
https://www.bankoncube.com/post/what-is-cryptocurrency-is-investing-in-it-safe
Disclaimer
Although the material contained in this website was prepared based on information from public and private sources that AMPRaider.com believes to be reliable, no representation, warranty, or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and AMPRaider.com expressly disclaims any liability for the accuracy and completeness of the information contained in this website.
