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The price of crypto sharply plummeted in 2022 as the industry faced new challenges like rising interest rates and the collapse of some major players, like FTX.
There were still good reasons to be optimistic beneath the surface. For instance, the Bitcoin network successfully handled billions of dollars worth of daily transactions while operating twenty-four hours a day, 7 days a week, without any downtime. Alternatively, The Merge, Ethereum’s switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS), was successfully implemented by its creators.
In such a volatile market, you can always rely on stablecoins when it comes to Crypto investments. So let’s have a quick overview of what they are and why you should choose stablecoins.
Introduction to stablecoins
Stablecoins are cryptos that make an effort to keep their value pegged to assets belonging to other classes, such as fiat money, commodities, and so forth. In this context, the term “stable” refers to how much more predictable the prices of stablecoins are than most other cryptos.
Stablecoins thereby address the main issue with cryptos, namely their extremely volatile pricing. Because of this, consumers use them as instruments of reliable value storage and affordable money transfers in addition to rebalancing their portfolios.
Why should you choose stablecoins?
- Volatility reduction: Because stablecoins are pegged to a real-world asset, their value is less volatile than other cryptocurrencies, making them a more stable investment option.
- Ease of use: Stablecoins can be easily bought and sold on cryptocurrency exchanges, just like other cryptocurrencies, making them accessible to a wide range of investors.
- Hedge against inflation: Some stablecoins are pegged to assets such as gold, which can be a hedge against inflation.
- Use in Decentralized Finance (DeFi): Stablecoins are widely used in Decentralized Finance (DeFi) as collateral, lending and borrowing, and other financial services that use smart contracts.
Cross-border payments: Stablecoins can be used for cross-border payments as they can be easily converted to other currencies and can have lower transaction fees than traditional financial services.
Markets, traditional or crypto, have been both strangers to “stability”. Fluctuations are seen as the only truth in markets, and we have witnessed this recently in the crypto market more than ever.
Types of Stablecoins
- Fiat-collateralized Stablecoins: Fiat-collateralized stablecoins are backed by a fiat currency such as the Euro, the British Pound, or the US Dollar.
- Commodity Collateralised Stablecoins: Tangible assets such as precious metals, oil, and real estate are used to back commodity-backed stablecoins.
- Crypto-collateralized Stablecoins: Stablecoins that are crypto-collateralized are backed by other cryptocurrencies. Because the reserve cryptocurrency may be volatile, such stablecoins are over-collateralized, meaning that the value of the cryptocurrency held in reserves exceeds the value of the stablecoins produced.
- Algorithmic Stablecoins: In essence, algorithmic stablecoins could provide stability based on market supply and demand. It’s also worth noting that algorithmic stablecoins have the greatest degree of decentralization and independence.
Read here to learn more about the types of stablecoins. Further, here is a list of the safest stablecoins to buy in 2023.
Top 4 Stablecoins to Buy in India in 2023
- Tether (USDT)
Investors invest in stablecoins to provide security and stability to their assets during a crypto market crisis. USDT is a coin that can be easily exchanged for other currencies. It is built on the public ledger of Bitcoin, so it’s always available to use, and you’ll never have to worry about fluctuating value.
USDT was introduced in 2017 by Tether Ltd, which is based in Hong Kong. Tether aims to provide an alternative to fiat currency by using blockchain technology, allowing them to create a digital currency with no volatility. To maintain stability, USDT primarily balances another cryptocurrency through pair exchanging.
To check out the prices of USDT click here.
- USD Coin (USDC)
Dollars-denominated assets provide the entire backing of the USD Coin (USDC). One USDC coin has the same value as one US dollar, making USDC a tokenized version of the dollar. Being a stablecoin, USDC is intended to have a constant value. Similar to USDT, most of USDC’s supporters are users attempting to avoid excessive volatility.
Influenced by the dollar value, USD Coin gains from the weak fiat markets. Many consumers will choose USDC as a steady pair to fend off the losses. Hence, the coin will persevere through the crypto winter.
Click here to check out the USDC prices.
- Binance USD (BUSD)
Paxos and Binance established the BUSD stablecoin in an effort to develop a cryptocurrency that would be pegged to the US dollar. The fact that one unit of BUSD is equal to one US dollar is a major feature of BUSD. Paxos owns a quantity of US dollars equivalent to the whole supply of BUSD to support this value. As a result, changes in the price of USD immediately affect the stablecoin’s price. To guarantee the protection and safety of user assets, BUSD delivers a monthly audited report of reserves in accordance with strict regulatory criteria.
- PAX Gold (PAXG)
The Paxos Trust Company is the custodian of the ERC-20 stablecoin PAX Gold (PAXG), which is backed by physical gold reserves. In protected gold vaults like Brink’s, each PAX Gold token is equivalent to one troy ounce of a 400-ounce London Good Delivery gold bar. Because PAXG represents actual gold, its value is directly correlated with the current market price of that actual gold.
The New York State Department of Financial Services oversees and approves PAXG. A third-party auditing company conducts monthly audits to confirm that Paxos’ gold reserve matches the supply of PAXG tokens in order to ensure that Paxos maintains its reserves. These attestation reports are published on Paxos’ official website. The developers of PAXG regularly inspect smart contracts for potential faults. To check out the prices of PAXG click here.
Conclusion
In this article, we have discussed the top 4 stablecoins that you can buy in 2023. But, it is advisable that before making any market investment, investors should conduct their own research.
Frequently Asked Questions
What Are The Best Cryptocurrencies To Invest In?
The best cryptocurrencies to invest in would be the ones you study and analyze in detail. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, and many altcoins such as Tron, Ripple, Litecoin, etc.
How Many Cryptocurrencies Are There?
There are over 5000 other digital currencies available on the internet in addition to Bitcoins. The only problem is that they haven't gotten the users' attention. Besides Bitcoins, a few other digital currencies have gained popularity among users. It's been more than ten years since Bitcoins were first released, and now they've achieved new heights thanks to their phenomenal success.
Is Mining Cryptocurrency Legal?
Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts. The legality of cryptocurrency mining is dependent on where you live. In India, there is no restriction on crypto mining.
How To Invest In Cryptocurrency Stocks?
Cryptocurrency can be purchased in two ways: through mining or exchanges. The process of confirming and adding transactions to the blockchain public ledger is known as cryptocurrency mining. Cryptocurrency exchanges are another option. Exchanges make money by charging transaction fees, but there are alternative platforms where you may communicate directly with other cryptocurrency traders.
How To Invest In Cryptocurrency?
There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.
What Is Virtual Currency?
Virtual currency is a type of uncontrolled digital currency that can only be used online. It is exclusively stored and transacted using designated software, mobile or computer applications, or unique digital wallets, and all transactions are conducted through secure, dedicated networks. Because digital currency is just currency issued by a bank in digital form, virtual currency is not the same as a digital currency. Virtual currency, unlike ordinary money, is based on a trust structure and cannot be issued by a central bank or other banking regulatory organization.
What Is Crypto?
Crypto or a cryptocurrency is a digital currency protected by cryptography, making counterfeiting and double-spending nearly impossible. Blockchain technology is used to produce cryptocurrencies (a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a government does not issue them. The word "cryptocurrency" refers to the encryption methods employed to keep digital currencies and the network secure.
Is Cryptocurrency Banned In India?
No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.
What Is Cryptocurrency?
A cryptocurrency is a digital currency secured by encryption, due to which chances of activities such as counterfeiting and double-spending taking place get close to impossible. Cryptocurrencies get created on blockchain technology ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are unique in that they do not get issued by any central authority. The term "cryptocurrency" comes from the encryption techniques used to keep digital currencies and the network safe.
Are Cryptocurrencies Legal In India?
In India, cryptocurrency is legal, and anyone can buy, sell, and trade it. Because India lacks a regulatory system to regulate its operations, it is presently uncontrolled. According to the Ministry of Corporate Affairs, companies must now document their crypto trading/investments inside the financial year.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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