Stable coins becoming popular
Stable coins are those cryptocurrencies that have a stable price in the market and are supported by a community like gold or currency value like the dollar.
Investors are looking for stable coins in the cryptocurrency market which will give them stable returns. A stable coin doesn't have extreme fluctuation which will make you a huge amount of profit or a huge amount of loss. The fluctuation is at a very small level. You can say, stable coins are safe investments. As the name Stable coin, they remain at a stable price that’s the major reason for their popularity.
Types of Stable coins:
Fiat collateralization means that the stable coins are collateral with the real currency. It’s just like the Reserve Bank of every country issuing currency and keeping gold as security. The stable coins which are collateralized are Trust Token, GUSD Paxos, Tether-USDT, TUSD Gemini, USDC, PAX Circle.
Crypto-Collateralized means that the stable coins are backed up by cryptocurrency like Ethereum which is a stable coin. Being backed up by cryptocurrencies the stable coins have protocols to follow as cryptocurrencies price fluctuates. These protocols must be followed to ensure that the prices are kept stable. The stable coins which are crypto-collateralized are Maker DAO and Haven.
These are a little different as these stable coins are not backed up by any fiat currency or any cryptocurrencies. The algorithm governs all the non-collateralized stable coins. The stable coins which are non-collateralized stable coins are Basis which was introduced in 2018 and the other is Carbon.
Stable coins can be backed up with multiple assets such as commodities like gold or silver, bonds, commercials papers or real estate. Either they are backed up on multiple assets or either one or two assets. The price of the stable coins fluctuates as the prices of these assets. The stable coin backed up by assets and SwissRealCoin backed up by the support of the Swiss Real Estate Portfolio and Digix Gold backed up gold was introduced in the market in 2018.
Difference between Stable coin and Bitcoin
● Stable coins are supposed to have their prices stable and bitcoin prices fluctuate a lot. Returns are also stable.
● Bitcoin can make you huge profit which Stable coins don’t, investors who can take a risk and want huge profit invest in Bitcoin.
● Stable coins are backed up by security and that’s a reason they have become popular among investors and Bitcoin fluctuates due to many reasons.
● As a mode of payment, Stable coins are preferred as their prices are stable and Bitcoin keeps varying as Bitcoin is volatile.
Cryptocurrencies which are Stable coins
Tether was launched as Real Coin in 2014 but the name changed to Tether and it started trading in the market in 2015. It is said that one Tether is backed by one dollar and that’s the reason the prices of Tether are stable. Tether is the world's largest Stable coin according to its market capitalization.
USD Coin (USDC) was launched in September 2018. USD Coin is backed up with a dollar or any other assets which are regulated by U.S financial institutions that have the same price. The price of one USD Coin is $1.00. The company Visa has allowed the use of USD Coin to make payments or settle their accounts, this is possible as USD Coin is a stable coin.
Binance USD was founded by Binance and Paxos and trading of Binance USD started in September 2019. The Binance USD (BUSD) is backed up by dollars and it is regulated by New York State Financial Service. For trading, it is available on the Paxos platform or Binance.com.
These are the top three stable coins and there are many others. You can use apps like visit. You can invest money in both stable coins and non-stable coins also. In this way, you will have the risk factor and stable returns also. If you are new to cryptocurrencies then you should first invest in stable coins and then move forward. Many countries are opting to use Stable coins as a mode of payment which is also making them popular. Research and study the market before you invest money in Stable coins. Even though they can fluctuate as they have a minimum amount of risk.
Keep up with the top stories from Reader’s Digest by subscribing to our weekly newsletter.