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If you are to buy cryptocurrency in India, you probably think Bitcoin is the most widely used cryptocurrency across the globe; there’s a good chance that you’re wrong. Bitcoin might be quite popular, but according to CoinMarketCap, the crypto with the highest daily and monthly trading volume happens to be Tether or USDT, even though its market cap is significantly smaller than that of Bitcoin.
Now, what is Tether? Tether is a particular kind of cryptocurrency, known as stablecoins. If you were to buy Bitcoin or any of the altcoins on any cryptocurrency exchange in India, you’d find most of the trading is done in USDT. Indeed, most seasoned crypto traders rely on stablecoins while trading to protect their holdings, and for a good reason, too: traders quickly switch to a stablecoin when they expect a crypto coin’s price to fall.
Why, you ask?
Well, to find that out, let’s first see what stablecoins actually are, shall we?
So, What Are Stablecoins?
Simply put, stablecoins are cryptocurrencies that act like fiat currencies; reserve assets advocate them. The value of a stablecoin can represent that of a physical currency, a valuable asset like gold, and even another cryptocurrency. For instance, the value of Tether or USDT is pegged to the US dollar; 1 USDT is equal to 1 USD, so the USDT and USD maintain a 1:1 ratio in terms of value. The primary objective of stablecoins is to offer price stability – unlike regular cryptocurrencies. As of right now, most stablecoins exist on the Ethereum blockchain.
Key Characteristics of Stablecoins
Stablecoins combine the better features of cryptocurrencies and fiat money, so they essentially carry the best of both worlds. Here are some of the key characteristics of stablecoins that you should be aware of if you want to buy cryptocurrency in India:
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- Stablecoin prices don’t fluctuate as wildly as regular cryptocurrencies. Crypto prices are ever volatile and unpredictable at the best of times. This particular trait of cryptocurrencies is one of the factors that’s keeping them from becoming a mainstream mode of payment. However, stablecoins are tied to underlying assets that collateralize them and keep them grounded, so they are suitable for mainstream adoption.
- Since stablecoins are basically cryptocurrencies, transactions are processed fast while maintaining the counterparties’ privacy and security, making them fit to be used for regular transactions.
- Using stablecoins for transactions also means you pay the lowest possible trading charges, regardless of the cryptocurrency exchange in India you use to trade and store your crypto.
- Like with the usual cryptocurrencies, you can send funds to anyone in any corner of the world using stablecoins without needing intermediaries.
Categories of Stablecoins
Stablecoins can be categorized into three classes based on the types of assets that keep them collateralized. If you intend to buy cryptocurrency in India, you should be aware of these classifications:
- Fiat-Collateralized Stablecoins: Fiat-collateralized stablecoins – also known as centralized stablecoins – are the most widely used stablecoins. These have either fiat currency reserves or physical assets backing them up. Therefore they are the best option in terms of stability.
Fiat-collateralized stablecoins have a central authority figure/ organization (for example, financial institutions like banks) behind them that holds a certain amount of fiat currency and issues an equivalent number of stablecoin tokens as collateral. Precious metals like gold, silver, etc., and even commodities like natural gas, oil, etc., can also be used as collaterals by authority figures to issue stablecoins.
Aside from Tether, TrueUSD is another fiat-collateralized stablecoin pegged to the USD at a ratio of 1:1.
- Crypto-Collateralized Stablecoins: Crypto-collateralized stablecoins, as you have probably guessed, have cryptocurrencies (like Bitcoin, Ethereum, or Ripple) to ground their values.
You might be wondering what’s the point of crypto-collateralized stablecoins since any price fluctuations of the underlying crypto would affect the stablecoin as well. However, to combat that very issue, crypto-collateralized stablecoins are
over-collateralized, i.e., the stablecoins released for circulation are smaller in number compared to the number of cryptocurrencies kept in reserve. Additionally, crypto-collateralized stablecoins are trustless and not controlled by a singular authority figure.
MakerDAO’s DAI is perhaps the most popular crypto-collateralized stablecoin, with Ethereum acting as collateral.
- Non-Collateralized/ Algorithmic Stablecoins: Finally, algorithmic stablecoins are uncollateralized – they don’t have any reserves backing them up. However, they use smart contracts and autonomous, distributed algorithms to mimic the mechanism that works behind an institution like a central bank and keep the values stable. An algorithmic stablecoin network can automatically issue new coins when the price goes up and burn existing coins to decrease the coin supply when the price goes down.
Should You Consider Investing in Stablecoins?
The foremost criticism against stablecoins is that they are inherently centralized, which sort of defeats one of the primary purposes of cryptocurrency – a decentralized financial system. Therefore, once you buy stablecoins, you’d have a central authority figure holding power over your funds. Moreover, in theory, these centralized organizations can withdraw the issued stablecoins at any moment since the code inside the stablecoins allows them to burn or freeze these coins. Naturally, they can also issue more stablecoins if they see fit.
That being said, stablecoins have still provided the general populace with a gateway into the crypto space by extracting the uncertainty associated with the regular cryptocurrencies’ values. They hold the potential to become a preferred alternative to traditional money and bring about a more global adoption of cryptocurrencies. Therefore, if you want to buy cryptocurrency in India, you should definitely consider investing in stablecoins.
Wondering which cryptocurrency exchange in India you should buy and store your crypto on? WazirX has earned a reputation for being the safest and most cost-effective platform within the Indian crypto community to buy and sell well over 100 cryptocurrencies! To find out how you can open a crypto trading account and buy cryptocurrency in India, you can give this blog post over here a read!
Happy trading!
Frequently Asked Questions
How Does Bitcoin Technology Work?
The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.
Is Bitcoin Legal In India?
In India, Bitcoin is not illegal. Because of cryptocurrency's rapid evolution, policymakers and regulators seemed to have recognized the chance to accept the new technology early. From the infamous 'RBI ban' in 2018 to reports of an impending bill banning cryptos in 2021 that has yet to develop, India has seen its fair share of ups and downs when it comes to Bitcoin regulation. Last year, the Supreme Court Of India approved the use of Bitcoin throughout the country. According to the Supreme Court, the existence of Bitcoin or any other cryptocurrency is unregulated but not unlawful.
Can I Invest In Cryptocurrency?
Yes, with exchanges like WazirX, you may invest in cryptocurrency in India. To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process.
Is Pi Cryptocurrency Safe?
Pi Network captured the crypto community’s interest even before it officially debuted. Its innovative mobile mining approach and user-friendly design simplify crypto adoption for a broader audience.Some users see this as a chance to get engaged in the crypto from the beginning and profit in the future, similar to how early Bitcoin adopters made huge profits by mining and keeping the coin. Other users have compared Pi to a worthless multi-level marketing (MLM) scheme.
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.
Can Bitcoin Be Converted To Real Money?
Crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer Peer Transactions are all options for converting Bitcoin to cash. This can be accomplished by using Bitcoin exchanges such as WazirX. A Bitcoin ATM is a real place where you may purchase and sell Bitcoins with cash, unlike standard ATMs that allow you to withdraw money from your bank account. Many websites provide the option of purchasing Bitcoin in return for a prepaid debit card that works similarly to a standard debit card. Through a peer-to-peer marketplace, you may sell Bitcoin for cash faster and more privately.
How Much Is 1 Bitcoin Worth Today?
Check out the current price of Bitcoin on the WazirX exchange. Bitcoin's value is primarily determined by its supply and demand in the market. Other elements have an impact on its worth. Its intrinsic value can also be calculated by calculating the average marginal cost of producing a Bitcoin at any given time, based on the block reward, electricity price, mining hardware energy efficiency, and mining difficulty.
How To Convert Bitcoin To Cash?
There are many ways of converting Bitcoin to cash, such as crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, Peer to Peer Transactions. You can use cryptocurrency exchanges such as WazirX for this. Unlike typical ATMs, which allow you to withdraw money from your bank account, a Bitcoin ATM is a physical location where you may buy and sell Bitcoins using fiat currency. Several websites provide the option of selling Bitcoin in return for a prepaid debit card that may be used just like a standard debit card. You can sell Bitcoin for cash through a peer-to-peer platform in a faster and more anonymous manner.
How Can I Convert Bitcoins To Cash?
Bitcoin may be converted to cash in various ways, including crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer to Peer Transactions. You may do this by using Bitcoin exchanges like WazirX. You may also sell Bitcoin for cash faster and more anonymously through a peer-to-peer marketplace.
Is Bitcoin And Cryptocurrency The Same Thing?
Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.
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