Benzinga’s picks for the best stablecoins this month include Tether, USD Coin, Binance USD, TrueUSD, Origin Dollar, and Binance USD, which are available on crypto exchanges such as eToro, Coinbase, and Kraken.
Stablecoins are a type of cryptocurrency that mirrors another asset to reduce volatility. These are pegged to stable assets or backed by algorithms. Stablecoins grew in popularity after the 2017 cryptocurrency boom as investors sought a less volatile store of value. This has led to central banks and governments becoming interested in developing their own digital currencies.
Stablecoins provide investors with stable assets within the crypto space, facilitating faster transactions and regulatory compliance. Gemini Dollar (GUSD) and Paxos Standard (PAX) are two examples of coins that will receive regulatory approval from the New York State Department of Financial Services.
Investing in stablecoins can be a smart way to diversify your investment portfolio and protect yourself from the volatility of the cryptocurrency market. Look for stablecoins that are fully collateralized, regularly audited, and backed by trusted institutions. Additionally, consider factors such as fees, liquidity, and potential regulatory scrutiny before making any investment decisions. In this article, Benzinga reviews the top stablecoins currently available on the market.
Let’s take a quick look at today’s best stablecoins:
Best stablecoins right now
As the number of stablecoins grows, it’s good to know the most useful and well-fixed options. The top stablecoins by market cap today are:
1.Tether (USDT)
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Tether, so named because it is “tied” to the value of the US dollar, is the most well-known stablecoin in the cryptocurrency world. It is backed by gold, traditional currencies and cash equivalents.
Tether is also known for its security and smooth integration with crypto-to-fiat platforms. Although it is arguably the largest stablecoin, it is also often considered the most risky due to its questionable past. It was discovered by the New York State Attorney General that it had publicly lied about holding US dollar reserves that matched the amount of USDT 1:1. Shortly thereafter, it became necessary to clarify the actual composition of the reserves.
Tether (USDT) currently trades at around $1.00 and has a market cap of over $115 billion.
2. True US Dollar (TUSD)
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True USD (also known as “TrueUSD”) is 100% backed by the US dollar and is one of the most liquid stablecoins on the market. This coin offers lower transaction fees and higher interest rates on held balances than fiat wire transfers.
TrustToken, the company behind True USD, also has stablecoins pegged to other major currencies (TrueAUD, TrueGBP, TrueHKD to name a few).
True USD (TUSD) is currently trading around $0.9996 and has a market cap of over $495 million.
3. Paxos Standard (PAX)
Paxos Standard aims to maintain 1:1 parity with the US dollar. This was created in response to the Tether printing controversy, which came under fire for unconfirmed claims that Tether held $1.8 billion in Deltec Bank & Trust to back its stablecoin.
PAX is currently trading at around $1.00 and has a market cap of over $111 million.
4. Binance USD (BUSD)
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Not to be outdone, the cryptocurrency exchange Binance also released Binance USD, which is pegged 1:1 to the US dollar. BUSD is located on the Binance Smart Chain (BSC) network, which is an alternative to Ethereum. BUSD is often used in the BSC decentralized finance (DeFi) scene and for trading between BSC cryptocurrencies.
Binance USD (BUSD) is currently trading at around $1.00 and has a market cap of over $69 million.
5.USD Coin (USDC)
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USD Coin was launched by fintech company Circle in partnership with Coinbase, a popular cryptocurrency exchange. The main purpose of USD Coin is to provide a reliable and stable digital currency that can be used for trading, trading, and storing value.
The company behind USDC conducts regular audits to ensure there are enough physical US dollars to back the token. Transparency and accountability give users peace of mind. Additionally, USD Coin can be used for various purposes such as cross-border payments, remittances, and online purchases. Supported by numerous platforms, it’s easy to buy, sell, and use.
USD Coin (USDC) is currently trading at around $0.9999 and has a market cap of over $34 billion.
6. Origin Dollar (OUSD)
Origin Dollar’s OUSD is unique in that it is backed by the top stablecoins currently on the market (USDC, DAI, USDT). In this way, investors can diversify the risk of one stablecoin being depegged from the US dollar. Additionally, it’s a great option for investors who want to invest for the long term and don’t want to actively manage their portfolio. OUSD allows users to earn interest directly from their wallets as the DAO manages which protocols (Aave, Curve, Convex, Compound) they regularly deploy their funds to. OUSD is available to investors on Gate.io and KuCoin.
Origin Dollar (OUSD) is currently trading at around $0.9971 and has a market capitalization of over $7 million.
Types of stable coins
Stablecoins can be divided into four different categories based on the methods employed to stabilize their value.
Commodity-backed stablecoin
Commodity-backed stablecoins are stabilized with hard assets such as gold or real estate. The most commonly used asset to collateralize stablecoins is gold, but many use a diverse basket of precious metals.
Fiat-backed stablecoin
Stablecoins backed by fiat currencies, such as the Chinese Yuan, hold reserves of that currency as collateral. Other forms of fiat currency include precious metals such as platinum and silver, and commodities such as corn and oil.
Most fiat-backed stablecoins are backed by dollar reserves. Currency reserves are managed through independent custodians that are regularly audited to ensure compliance.
Stablecoins backed by cryptocurrencies
Crypto can also back other cryptocurrencies. The same goes for stablecoins backed by cryptocurrencies. To counter the relative volatility of backing stablecoins via cryptocurrencies, coins often maintain overcollateralized positions. This ensures that the stablecoin maintains its intended value (often $1) even if the value of the cryptocurrency backing the coin plummets.
In other words, stablecoins will be in circulation with a much lower supply relative to their reserves than fiat currencies. For example, a cryptocurrency-backed stablecoin might only issue $500 worth of coins for every $2,000 of reserves, rather than maintaining a 1:1 ratio.
Algorithmic Stablecoin or Siegniorage Style Stablecoin
Siegniorage is managed and backed by algorithms and processes rather than separate assets or currencies. The idea of supporting sieges came from a white paper by renowned cryptographer Robert Sams. Sams has proposed the idea of a Federal Reserve Bank Coin (Fedcoin) that could work that way. Smart contracts deployed on decentralized platforms could act as autonomous “backers” for this type of coin.
Trading or investing in stablecoins
Every advanced cryptocurrency trading platform allows access to stablecoins alongside unpegged cryptocurrencies. Whether you are an active trader or a long-term investor, having this tool available is a smart choice to preserve your assets and stabilize the value of your portfolio. Here are some of the best crypto exchanges to consider trading with.
Pros and cons of investing in stablecoins
Like other forms of crypto, stablecoins have their own advantages and disadvantages.
Stablecoins hold the power of all cryptocurrencies to move regardless of physical boundaries. Transactions do not require third-party verification, making them faster and less costly compared to traditional processes. Transactions using stablecoins are transparent on a public ledger, unlike fiat currencies. Unlike some cryptocurrencies, stablecoins are primarily created by a central organization that owns the currency. Even DAI, a well-regarded stablecoin that markets itself as decentralized, has faced increased scrutiny for its centralized organization. Stablecoins require third-party auditing, which can create conflicts of interest and go against the idea of being decentralized, trustless, or pseudonymous. They do not offer the same high return on investment as unpegged cryptocurrencies.
Harness stability to generate profitability
Most crypto investors would probably agree that having one or two stablecoins in their portfolio is a good way to diversify and protect themselves. If you are actively trading volatile altcoins, you can also use stablecoins to quickly exit a declining asset and buy it back at a better price.
Will stablecoins completely disrupt the crypto space? A complete takeover is unlikely as stablecoins and unpegged cryptocurrencies have different purposes. A more likely scenario is that stablecoins serve as another financial instrument in the digital transformation of money. Stablecoins provide liquidity to exchange markets, serve as a medium of exchange for risk-averse investors, and protect physical assets in the digital realm.
FAQ
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The best stablecoin to buy is determined by security, transparency, and regulatory compliance. Popular options include Tether, USD Coin, and DAI, each with their own advantages and disadvantages. Ultimately, your choice will be determined by your personal preferences and investment goals.
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Tether (USDT) is considered the most reliable stablecoin, backed by real reserves pegged 1:1 to the US dollar. Despite controversy, tethers are still widely used. Other stablecoins such as USD Coin (USDC) and Dai have also gained credibility. Confidence in stablecoins depends on personal preferences and risk tolerance.
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The choice between USDC and USDT depends on personal preference and specific needs. USDC is transparent, compliant, and backed by reserves. USDT is more widely used but faces controversy over its reserves. Before choosing a stablecoin, it is important to consider factors such as security, reliability, and liquidity.
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Stablecoins such as Tether, USD Coin, TrueUSD, and Paxos Standard are backed by USD at a 1:1 ratio for stability and trust in their value.
