Top Stablecoins to Buy in 2022
Despite of widespread adoption of cryptocurrencies by traders across the world to build incredible profits through their investment portfolios, there is still a considerable population of investors who refrain from including cryptocurrencies in their investment portfolios because of the fear of suffering losses. In addition to this, the price fluctuations for cryptocurrencies are so wide that these investors choose to keep themselves out of crypto trading completely. This has led to the emergence of stablecoins that aim to solve this problem for investors and help cryptocurrencies occupy a part in all investment portfolios.
If you are also interested in including a component of digital currencies in your portfolio, we are listing down some of the top stablecoins that you must buy in 2022.
What are Stablecoins?
Stablecoins are a type of cryptocurrency whose values are pegged against tangible assets like currencies and precious metals.
These assets serve as collateral for the stablecoins. Stablecoins aim to overcome the major drawback of cryptocurrencies: excessive price fluctuations.
On average, the prices of cryptocurrencies are known to change by 10% over a span of 24 hours. Whereas, in the duration of high market volatility, the prices can fluctuate by over 50%.
This leads to the significant criticism of cryptocurrencies and an explanation of the reason why cryptocurrencies are yet to occupy the mainstream market and be used as a payment method. This is where stablecoins come into the picture and rescue the cryptocurrencies by allowing them to scope for being used as a method of making payments.
Since the prices of stablecoins are related to the prices of assets that they are pegged against, the chances of facing stark differences in the prices over a short time, are very minimal. This helps the merchants to accept stablecoins as a mode of payment and prevent them from suffering losses which is one of the focal points of the reputation of cryptocurrencies.
Types of Stablecoins
There are mainly four types of stablecoins that currently exist in the market. These are fiat-collateralized stablecoins, commodity-backed stablecoins, crypto-collateralized stablecoins, and algorithmic stablecoins. These stablecoins differ from each other in the way their prices are controlled. Let’s learn a bit more about each of these types of stablecoins.
Fiat-collateralized stablecoins are pegged against fiat currencies such as US Dollars, Sterling Pounds, Euros, etc.
Since fiat currencies are controlled by a centralized authority, their prices remain somewhat constant. Also, because the stablecoins can be exchanged against these fiat currencies as collaterals, the prices of the stablecoins also remain the same.
Commodity-backed stablecoins are pegged as commodities such as precious metals such as gold and silver, and physical materials such as oil, gas, and real estate.
Since the prices of these commodities don’t fluctuate so drastically, this helps in keeping the prices of stablecoins, somewhat stable. This, in turn, helps the investors in invest in these physical assets without actually having to step out of their homes.
In addition to this, unlike other cryptocurrencies, commodity-backed stablecoins offer some actual utility to investors as they can be exchanged for physical assets at any time they want. PAX Gold is an example of a commodity-backed stablecoin where the price of the coin is backed by physical gold.
As the name suggests, crypto-collateralized stablecoins are backed by other cryptocurrencies.
Now you may ask what is the point of backing the stablecoin against other cryptocurrencies when the prices of cryptocurrencies are themselves so variable?
Here is how it works. The stablecoins are overcollateralized against other cryptocurrencies, meaning that the ratio of cryptocurrency to the stablecoin is maintained to greater than one. This means that the value of stablecoins will always exceed the value of cryptocurrencies against which it is backed. This provides a cushion to the value of stablecoin against the price drop of the backing cryptocurrency.
Algorithmic stablecoins manage the price fluctuations with the help of computer algorithms that leverage the supply of the stablecoins according to their price.
These stablecoins can be regarded as a sub-class of crypto-collateralized stablecoins as the algorithms used to regulate the price of this stablecoins quote the relationship between the stablecoin and other cryptocurrencies pegged to it. Algorithms regulate the prices with respect to the supply and demand for the coin.
For example, if the demand for an asset goes up against a limited supply, the algorithms raise the price of the stablecoin and vice versa.
Should You Buy Stablecoins?
There shouldn’t be any second thoughts about buying stablecoins and adding them to your crypto portfolio. They not only add a digital component to your portfolio but also help in balancing the losses that may affect your portfolio. In fact, stablecoins can be a much better investment than other investments derivatives. Let’s look at some other advantages of buying stablecoins.
Value remains stable
Unlike other cryptocurrencies whose values fluctuate within minutes, the value of stablecoins remains stable. This eliminates the fear of losing money that haunts most long-term crypto investors. Along with that, stablecoins add stability to the overall crypto portfolio. This is why, out of the 5% portfolio value that experts recommend investing in crypto, you should invest at least 2% in stablecoins.
A bridge between fiat and digital currency
For someone who is looking to invest in fiat currency digitally, the stablecoins act as a junction between the two worlds. While the digital aspect of stablecoins prevents them from crumbling over time unlike fiat currencies, the fiat aspect of stablecoins ensures investors a stable price for a long-term investment.
Convenient for the investors
Imagine going to a bank standing in long queues to withdraw or deposit cash or feeling skeptical about the purity of gold. Looks tiresome, right? Stablecoins have provided us with an easy way to invest in commodities that we like and fiat currencies that we want to invest in.
Unlike bank transfers where sending money across international borders requires a certain amount of fee, the stablecoins offer borderless transactions. You can send your dollars, pounds, or euros, or escape a hefty import and export duty on precious metals like gold, just by investing and trading in these stablecoins.
Since stablecoins are based on blockchains that work on a decentralized ledger system, the transactions are completely transparent. This means that you can always scrutinize the way your funds are locked and the security audits run by the companies to ensure the safety of assets.
Disadvantages of Buying Stablecoins
When compared with other digital currencies, stablecoins have very less disadvantages, which makes them even more attractive for crypto investors. However, let’s look at the possible disadvantages of stablecoins.
Even though the stablecoins are backed by fiat currencies, the decentralized aspect of stablecoins poses a threat of theft. As there is no centralized authority overlooking the transactions and keeping an eye on the origin and end points of the transactions, if your funds get stolen from your wallet, there is no hope of finding the scammer.
Lesser scope for profits
This disadvantage is particularly concerned with crypto traders whose sole intention of buying cryptocurrencies is to sell them when the price goes up and make profits. Since the prices of stablecoins are proportional to the fiat currencies or commodities backing them, there is absolutely no chance of generating profits.
Is it Safe to Invest in Stablecoins?
Yes, it is safe to invest in stablecoins unless you get trapped in a scam. However, there are easy ways of ensuring that you stay away from scams. For example, you should always look for popular exchanges like Binance, Coinbase, etc. In addition to this, you should always check the contract address of the stablecoins that you want to buy. Similarly, you should keep a hardware wallet to store your funds safely. If you have been looking to buy a good hardware wallet for your crypto assets, here is the list of the best hardware wallets.
How to Buy Stablecoins?
You can buy stablecoins just like you buy other cryptocurrencies. To buy stablecoins, follow the steps given below.
Choose a crypto exchange
As you may already know, you can buy digital currencies only on crypto exchanges. Therefore, you will have to choose a crypto exchange to buy stablecoins and add them to your portfolio. There are hundreds of centralized and decentralized crypto exchanges where you can buy a multitude of cryptocurrencies including stablecoins. But as it is impossible for you to check out each of them and find the best one for you, we have created a list of the best cryptocurrency exchange apps that you can use.
Select the stablecoin you want to buy
Once you have selected a crypto exchange, it’s now time for you to choose the stablecoin that you would like to buy. While there are a number of different things that should be considered by buying a stablecoin like market cap, price, trading volume, the project and the team behind the project, and so on, we have eased the process a bit for you. Read on to find the top stablecoins to buy in 2022 in this article.
Create an account on the exchange
After selecting the exchange and the stablecoins you would like to buy, you will need to create an account on the selected exchange. While centralized exchanges may ask you for your mobile number, email address, and KYC documents, decentralized exchanges allow you to create an account just by connecting your wallet to it.
Add funds to your account
When you have successfully created an account on the exchange and verified your identity (in the case of centralized exchanges), you can add a payment method to fund your account. Different exchanges support a variety of payment methods, ranging from direct bank transfers to UPIs. Depending upon your preference, choose the payment method and add money to your account.
Buy the stablecoin you have chosen
When you have successfully added money to your account, you can use this money to buy the stablecoins that you want. It should be noted here that scammers create forged tokens that look just like original tokens and coins. To avoid these scams, always copy the contract address of the token or coin that you want to buy from CoinGecko or CoinMarketCap. In addition to this, make sure that you copy the right contract address depending on the chain on which you would like to buy the coins.
Top Stablecoins to Buy in 2022
Now that you know in and out of stablecoins, it’s time to start investing. But before that, let us present the stablecoins list of top stablecoins.
Market Cap: $66,613,205,559
The inception of Tether dates back to the year 2014. Owing to its highest market cap among stablecoins, it is the most widely used stablecoin around the world. Pegged against US Dollars, one Tether can easily be exchanged for 1 USD. If you are a low-risk trader, Tether is the top stablecoin to buy in 2022.
2. USD Coin
Market Cap: $54,293,215,423
Centre, a joint venture between Circle and Coinbase, is the issuing company for USD Coin, which is one o the top stablecoins in the market. This stablecoin is not directly pegged against the US Dollar. Instead of this, USDC is pegged against the assets based on US Dollars. This unique feature of the coin presents several use cases, besides, decentralized finance.
3. Binance USD
Market Cap: $17,918,925,290
Among the most widely used stablecoins in the world, Binance USD, as the name suggests is the very own cryptocurrency of the largest crypto exchange in the world, Binance. Pegged against the fiat currency, usually US Dollars, the technology behind Binance USD has become one of the most widely adopted technologies in the world, leaving a lot more scope for the emergence of more stablecoins in the market.
Market Cap: $7,051,524,655
Pegged against the US Dollar in a 1:1 ratio, DAI stablecoin is a one-of-a-kind stablecoin based on Ethereum. Due to this reason, even though the stablecoin is backed by US Dollar, the market for the stablecoin remains quite volatile as compared to Tether.
5. True USD
Market Cap: $1,207,962,219
A truly collateralized cryptocurrency and a verified ERC-20 token, TrueUSD is the premier cryptocurrency that is developed on the famous Trust Token platform. The True USD stablecoin is one of the top stablecoins in the market and is maintained at a 1:1 ratio with respect to the US Dollar.
6. Neutrino USD
Market Cap: $710,057,783
Finding multiple applications like staking, collateralization, issuance, and so on, this stablecoin is pegged against US Dollar, like most others on this list of top stablecoins. Neutrino USD is basically an algorithmic and crypto-backed stablecoin. This means that the applications and governance of this coin are controlled by smart contracts.
7. PAX Gold
Market Cap: $604,639,766
Backed by Gold, PAX Gold is a verified ERC-20 token that can be easily exchanged for gold or traded anywhere in the world. The fact that PAX Gold allows people to invest in gold without having to actually buy gold and physically store it in banks or lockers, is something that makes this stablecoin stand out from the rest of the stablecoins on this list of top stablecoins.
Now that you are aware of the top stablecoins that you can invest in, it’s time for you to start acting and hedging your crypto portfolio against the extreme volatility that exists in the crypto markets. You can also use these stablecoins to buy $UFARM, which is the native currency of UniFarm, and use it to stake and earn a minimum APY of 36%. Buy stablecoins and stake now!
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