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Cryptocurrency is an umbrella term used to describe digital currencies that are built on the blockchain. Cryptocurrencies have become popular among the general masses because they can be traded for potentially lucrative returns.
In addition, many cryptocurrencies also have powerful utility functions such as smart contracts, cross-platform interoperability and lightning-fast transaction speeds..
That said, there are a few aspects of cryptocurrency like the relatively high volatility and unpredictability that can elicit a cautious and measured response amongst existing and potential investors alike.
There are also cryptocurrencies whose value rarely fluctuates and they are known for their stability compared to others like Bitcoin, Ethereum, and more. Such coins are called ‘Stable Coins’.
Stablecoins are cryptocurrencies that are pegged or tied to a stable external asset. The most popular stablecoins are tied to fiat currencies like the US 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 in cash in holding at a bank.
This acts as collateral and if an investor sells stablecoins, its equivalent is taken out of the reserve. It also means unlike other cryptocurrencies this is backed by an asset that has 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:
In fact, you’ll notice that the value of popular stablecoins is equal to USD 1 or close. However, the collateral opens up some stablecoins to certain risks.
Since the collateral is stored in a bank more often than not, 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 a great stepping stone for new investors to enter the world of cryptocurrencies without taking an unprecedented risk. You can consult a Cube Wealth coach or download a Cube Wealth App.
All things considered, stablecoins appeal to crypto investors because of factors like:
Now that you know everything about stablecoins, it’s time to move on to the list of the biggest and most stable cryptocurrencies in 2022 by market cap from the world of stablecoins.
This list of the most stable cryptocurrencies is sorted by market cap because it is considered to be a true indicator of the value and worth of stablecoins as most of them are pegged to the USD with value 1.
Tether (USDT) is one of the oldest stablecoins in the crypto market. 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, which simply means that the value of one Tether USDT is equal to USD 1. Tether claims to have reserves of cash and cash equivalents to back every USDT on the market.
USD Coin (USDC) is also pegged 1 to 1 to the USD. It was introduced back in 2018 and is managed by Circle and Coinbase through the Centre Consortium that they co-founded together.
USDC is the 9th most valuable cryptocurrency in the world. USD Coin claims to have a mix of cash and cash equivalents along with US Treasuries in reserve to back every USDC in circulation.
Binance USD (BUSD) is a stablecoin offered by the largest crypto exchange in the world Binance. BUSD is approved for use by the New York State Department of Financial Services (NYDFS).
1 BUSD is equal to 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 (UST) is a stablecoin offered by Terra. It is designed to track the value of 1 USD, that is, it’s 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 earning returns through arbitrage opportunities.
Dai (DAI) is a stablecoin that’s unlike others on the list so far. 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.
Here’s a bonus list of the most stable cryptocurrencies in 2022.
Stablecoins are generally tied to assets like fiat currencies, precious metals, and other cryptocurrencies. They’re known to be far more stable than regular cryptocurrencies like Bitcoin, Ethereum, and others.
What stablecoins are not known for is generating lucrative returns because that’s not what they’re designed to do. Stablecoins are generally used for arbitrage opportunities or as cash holding in crypto. You can consult a Cube Wealth coach or download a Cube Wealth App.
Yes, there are stable cryptocurrencies called "Stablecoins". These stablecoins are generally equal to 1 USD or in crypto terms, stablecoins are "pegged" to 1 USD. Stablecoins can also be pegged to other cryptos like Bitcoin. The most stable cryptocurrencies in the top 20 by market cap are known to rarely lose value.
The best stablecoins include the likes of Tether (USDT), USD Coin (USDC), Binance USD (BUSD), TerraUSD (UST), and Dai (DAI). These are known to be top stablecoins because of their market cap, which puts them in the top 20 cryptocurrencies.
A stable cryptocurrency or stablecoin is pegged to an asset like a fiat currency or cryptocurrency. Most top stablecoins are pegged to USD 1 and are rarely known to drastically lose value.
No, Litecoin isn't a stablecoin. It works similar to Bitcoin and in fact, was designed to be a better version of the world's largest cryptocurrency. You can read all about Litecoin Vs Bitcoin here. You can consult a Cube Wealth coach or download a Cube Wealth App.
Note: Facts & figures are true as of 06-04-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency.
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