Stablecoins — cryptocurrencies tied to the value of a physical asset — are an interesting bunch. There are tons of different types, from dollar-backed crypto to gold-backed crypto and more. Some are even in the top echelon of cryptocurrencies in terms of market cap.
However, are they worth investing in? Well, it depends on what your personal financial goals are. This guide is here to break down whether stablecoins are a good investment in 2021.
Stablecoin Pros
Right off the bat, it’s worth noting that stablecoins make investing in traditional assets quite accessible. You can invest in these assets without revealing your identity in most cases. Your investments are made available to you almost instantly, unlike others that take days or even weeks.
Some might argue that the biggest benefit of stablecoins is the ability to invest in fractional assets. You can invest in a fractional amount of a gold-backed stablecoin instead of being limited by the price of a full ounce of gold. That increases the accessibility of investments, ensuring even those with lower budgets can get involved.
Stablecoins also allow you to avoid the volatility of traditional cryptocurrencies. Considering each stablecoin is tied to the value of a traditional asset, they’re inherently non-volatile (unless the tied asset is volatile, of course). If you invest in cryptocurrencies, you can also convert your assets to stablecoins in anticipation of a market drop.
You can trust stablecoins, too, as legitimate ones have their backings audited by a third party. If a stablecoin doesn’t release public audits, it’s probably not worth trusting.
Stablecoin Cons
Generally, people invest to try and make a profit. With the growth of the cryptocurrency market, investors are especially jumping into these digital assets due to their volatility. Some investors love the rush of Bitcoin’s price jumping up and down, providing them short-term gains. Stablecoins, for the most part, cannot offer that opportunity.
After all, gold-backed stablecoins are tied to the relatively stable value of, well, gold. If gold’s price is sitting steady, then the stablecoin’s price will remain the same. However, while traditional cryptocurrencies are generated and have value based on their consensus algorithm, stablecoins are limited by physical assets. In the case of precious metals, there can only be so much of one metal at a time. Minting more crypto assets isn’t possible, not if the project is working honestly.
Of course, if you keep your stablecoins in an online or exchange wallet, they can get stolen. You’re putting your assets in the hands of another party. With precious metals, you can hold them physically and make sure that doesn’t happen. To some, not having to hold their metals is a boon, while others might want to keep control of their metals.
Stablecoins to Check Out
If you understand the pros and cons and are still deciding to invest in stablecoins, here’s a list of ones to check out.
USD Coin
USD Coin is tied to the value of the United States dollar. It was designed by a popular cryptocurrency exchange called Coinbase and another project, Circle. The asset is based on Ethereum and is audited every month to prove holdings.
Digix Gold
Digix Gold is a gold-backed stablecoin by Digix. Every Digix Gold represents one gram of real gold. Their gold bars weigh 100 grams each and are minted at some of the top refineries in the world. Of course, such assets are audited monthly to prove their holdings.
Binance USD
Binance USD is the official stablecoin of the Binance exchange, the world’s largest cryptocurrency trading platform, and tied to the USD. The asset is regulated entirely by the New York State Department of Financial Services (NYDFS) and can be viewed on their website.
TrueUSD
Like other stablecoins on this list, TrueUSD is tied to the United States dollar. It was the first stablecoin to do so and the first to achieve regulation. The company offers proof of its funding at all times and offers the asset on over 70 exchanges around the world.
Of course, you can redeem your TrueUSD for one dollar at any time.
