Before evaluating the best stablecoins in 2021, let’s first look at what they are, how they work, and their advantages to traders in the crypto space.
What is a Stablecoin?
Digital assets are known for their high volatility. However, there is one type of cryptocurrency designed to maintain a fixed value. According to their name, stablecoins are linked to assets such as gold or the US dollar, and, as the name implies, they are considered stable compared to other coins such as Bitcoin and Ethereum.
Today, the market capitalization of stablecoins has exceeded 100 billion, and this meteorite shows no signs of slowing down.
What Are the Different Types of Stablecoins?
There are several different types of stablecoins on the market today, from commodity to cryptocurrency and fiat.
A commodity-backed stablecoin is backed by assets such as oil, gold, and other precious metals. For example, Tether Gold and Paxos Gold. This type of stablecoin is particularly vulnerable to price fluctuations. However, goods should grow in price in the long term, so stablecoins should grow over time.
Additionally, there are decentralized stablecoins backed by cryptocurrency, such as DAI, which use Ethereum’s blockchain network. It is pegged to the dollar, supported by ETH, and locked in public contracts stored in the blockchain, with the ability to provide instant transactions and stable value with complete transparency.
Finally, fiat-backed stablecoins, such as Tether (USDT), the first of its kind, with the highest market capitalization of stablecoins, pegged to the dollar 1: 1. Centralized stablecoins backed by the US dollar will belong to a legal entity or an exchange. Unlike cryptocurrency-backed coins, stablecoin has created a central authority, and it needs to be trusted to maintain the appropriate supply in dollars and stablecoins.
Is Stablecoins a Good Investment?
When determining whether stablecoins are an excellent investment, we must take several factors into account. First, and most importantly, they provide a stable unit of value on decentralized exchanges and offer a private mode of storing and transferring capital.
Payments can be sent anywhere in seconds because stablecoins are very liquid and traded to be easily transferred to fiat or other cryptocurrencies. It makes them ideal for cross-border commercial transactions. In specific corridors, for example, between Latin America and Southeast Asia, the use of stablecoins will increase in 2021 to bypass the banking system and perform transaction settlements.
Another factor to consider is the interest rates of the stablecoin. When it comes to stablecoin compared to bitcoin, the interest rates on stablecoin are currently much higher, from 5% to 25% per annum on most exchanges, while Bitcoin and Ethereum range from 1% to 3% per annum.
When you convert cash to and from cryptocurrency, the process can be lengthy. Stablecoins can quickly make deposits and withdrawals from fiat currencies to crypto exchanges, and your capital will maintain its value.
The Best Stablecoins of 2021
The list of stablecoins below is not set in stone. The leading contenders will change over time as new stablecoins enter the market, moods change, cryptocurrency adoption grows, and blockchain technology develops.
Tether is a blockchain-based digital asset pegged to the US dollar, so 1 US dollar is always equal to 1 US dollar. Prevalent and low risk, it works to maintain a stable cryptocurrency value and remains the largest, most secure, and most widely used stablecoin.
TRUE US DOLLAR (TUSD)
True USD is the first-ever regulated coin supported by the US dollar. It is reliable, transparent, and an excellent means of protection against the cryptocurrency market’s volatility.
PAXOS STANDARD (PAX)
PAX is programmable, based on the Ethereum network, and is considered one of the best fiat-backed stablecoins for eliminating fees for cross-border transactions.
USD COIN (USDC)
The USDC, pegged to the US dollar, works on Ethereum, Stellar, Algorithand, and Solana blockchains. A fast and reliable coin known for transparent audit procedures.
BINANCE USD (BUSD)
Regulated by the New York State Department of Financial Services, BUSD provides fast, secure transactions. It was created due to a partnership between two large companies — Binance Exchange and Paxos Trust Company.
Are Stablecoins Safe?
In many ways, stablecoins are inherently more secure than other types of cryptocurrencies because they are much less volatile. When it comes to the security of stablecoin and bitcoin, since stablecoins have a fixed price, the value of a particular cryptocurrency should not fluctuate much, as it happens with bitcoin.
So, during periods of extreme volatility, many crypto investors transfer their digital assets to stablecoins and wait for the market to stabilize. The cost will remain stable, so they can continue to buy stable coins for fiat money until the market calms down before converting them into bitcoins or other cryptocurrencies.
Although stablecoins are an excellent way to protect against the cryptocurrency market’s volatility, crypto-arbitrage is another potentially very profitable option. Arbitrage algorithms assume the advantages of temporary inefficiency — short-term price differences, often caused by differences in liquidity and trading volume between exchanges.
Like stablecoins, crypto-arbitrage offers an excellent hedging opportunity. A price inefficiency provides a stable income stream with the same regularity in both bear and bull markets, ensuring that you will not remain vulnerable to market volatility, providing unprecedented passive profits.
Here at Intelfin, our fully automated platform generates passive income that reaches 108% per year, depending on the size of your investment.
Our intelligent algorithm scans dozens of exchanges, tracking hundreds of coins simultaneously, 24/7, and looking for coins offered at different prices. It buys a currency on the exchange where the price is lowest and then instantly sells it on the exchange where the price is highest, and all this before the temporary inefficiency disappears by itself.
In addition to the profit from crypto-arbitrage, you also get compound interest and capital gains from the work of hybrid algorithms and persistent rates on Intelfin liquidity pools.
The world of cryptocurrencies is growing and developing thanks rapidly to new, more reasonable, and secure solutions to financial problems on the Internet. Stablecoins are a great example, offering a faster, cheaper, and easily verifiable way to move US dollars and providing excellent protection against cryptocurrency instability.