Before we dive in and start rating the top stablecoins in 2021, let’s first examine what they are, how they function and what advantages they offer to traders in the crypto space.
Digital assets are best known for the fact that they are highly volatile. Yet, one type of cryptocurrency is designed to maintain a fixed value. Stablecoins are tied to underlying assets like gold or the US dollar, and as the name suggests, they are considered stable, relative to other coins like Bitcoin or Ethereum.
Today the stablecoin market cap has surpassed 100 billion and this meteoric shows no signs of slowing down.
There are a number of different types of stablecoin, from commodity-backed to crypto and fiat backed.
Commodity-backed stablecoins are collateralized by assets like oil, gold and other precious metals, examples being Tether Gold and Paxos Gold. This type of stablecoin is particularly vulnerable to price fluctuations. In the long term though, commodities should increase in value so the stablecoins should appreciate over time.
Then, there are decentralized crypto-collateralized stablecoins, such as DAI, which is maintained using the Ethereum blockchain network. Essentially, it is pegged to the dollar, backed by ETH and locked in publicly viewable contracts, stored on the blockchain, with the chance to provide instant transactions and steady value, with total transparency.
Finally, there are fiat-backed stablecoins, such as Tether (USDT), the first of its kind, with the highest stablecoin market cap, which is pegged 1-to-1 to USD. Centralized stablecoins, backed by the US dollar, will be held by an entity or an exchange. Unlike crypto backed coins, a central authority created the stablecoin and must be trusted to maintain a corresponding dollar and stablecoin supply.
When determining whether stablecoins are a good investment there are a number of factors to take into consideration. Firstly, and most importantly, they provide a stable unit of worth on decentralized exchanges and offer a private mode of storage and transfer of capital.
Payments can be sent anywhere in seconds, because stablecoins are highly liquid, and tradable so they can be transferred into fiat or other cryptocurrencies with ease. This makes them great for cross-border commercial transactions and in certain corridors, such as between Latin Ametrica and South-East Asia stablecoin usage is increasing in 2021, as a way to bypass the banking system and settle transactions.
Another factor to consider is stablecoin interest rates. When it comes to stablecoin vs Bitcoin, stablecoin interest rates are currently far higher, ranging from 5% to 25% APR on most exchanges, whereas Bitcoin and Ethereum range from 1% to 3% APR.
When you convert cash in and out of crypto, the process can be lengthy, but with stablecoins, deposits and withdrawals can be rapidly executed from fiat currencies to crypto exchanges and your capital maintains its value.
The below stablecoins list is not written in stone and the top contenders will change over time as new stablecoins enter the market, sentiment shifts, crypto adoption grows and blockchain technology develops.
Tether is a blockchain-based digital asset, pegged to the US dollar, so 1 USDT is always equal to $1. Exceptionally popular and low risk it works to keep crypto valuations stable and remains the largest, most secure and most widely used stablecoin.
The first ever regulated USD-backed stablecoin, True USD is reliable, transparent and considered to be an excellent hedge against crypto market volatility.
PAX is programable, based on the Ethereum network and deemed one of the best fiat-backed stablecoins when it comes to eradicating cross border transaction fees.
USDC, pegged to the US dollar, runs on the Ethereum, Stellar, Algorand, and Solana blockchains. Fast and reliable, it is known for transparent auditing procedures.
Regulated by the New York State Department of Financial Services, BUSD ensures rapid secure transactions. It was created through a partnership between two big names- Binance Exchange and the Paxos Trust Company.
In many respects, stablecoins are inherently safer than other types of crypto because they are far less volatile. When it comes to stablecoin vs Bitcoin security, since stablecoins have a fixed worth, the value of the cryptocurrency should not fluctuate dramatically in the same way as Bitcoin does.
So, in periods of extreme volatility many crypto investors move their digital assets into stablecoins and wait for the market to stabilize. The value will remain stable, so they can keep buying stablecoins with fiat money, until the market calms before converting it into Bitcoin or other cryptocurrencies.
While stablecoins are a great way to shield against crypto market volatility, another potentially highly lucrative option is crypto arbitrage. This involves taking advantage of temporary inefficiencies- short term price differences often caused by disparities in liquidity and trading volume across exchanges.
Like stablecoins, crypto arbitrage offers a great hedging opportunity. Price inefficiencies arise and provide a steady revenue stream with the same regularity in a bear or bull market, ensuring you are not left vulnerable to market volatility, while delivering unparalleled passive profits.
Here at ArbiSmart, our EU regulated, fully automated crypto arbitrage platform generates passive profits that start at 10.8% and reach up to 45% a year, depending on the size of your investment.
Our smart algorithm scans 35 exchanges, monitoring hundreds of coins simultaneously, 24/7, looking for coins offered at different prices at the same time. It buys the coin on the exchange where the price is lowest, and then instantly sells it on the exchange where the price is highest, all before the temporary inefficiency resolves itself.
In addition to earning profits from crypto arbitrage, you also earn compound interest and capital gains on the rising value of RBIS, ArbiSmart’s native token, which has already more than quadrupled in price since it was introduced just two years ago.
The world of crypto is growing and developing rapidly with new, smarter and safer solutions to online financial challenges. Stablecoins are the perfect example, offering a faster, cheaper, easily auditable way to move U.S. dollars and providing excellent protection against crypto volatility.
Check out the ArbiSmart blog to learn more about a wide selection of crypt-related topics.
ArbiSmart offers multiple, potentially highly lucrative revenue streams. Benefit from a secure, trusted space, where from day one, your crypto will be working hard on your behalf.