You can earn a huge return from bitcoin, but you have to deal with volatility. It means you can gain a lot or you can even lose your funds overnight. Similarly, you can also choose altcoins, and they are similar to fiat currency as both the coins are based on the same framework. But, stablecoins are different than other crypto currencies because stablecoins are less volatile in nature as they are backed with fiat currencies or other assets.
People cannot afford to lose their money and they do not invest their hard-earned money on crypto like bitcoin. You can earn a huge return overnight from bitcoin and you can even lose your entire funds overnight. So, it is similar to money laundering and gambling. But trading bitcoin is not an illegal activity as you have to pay the taxes on the returns that you received from your coins. All kinds of cryptos are volatile to some extent as it can make you lose your money anytime. In this case, stablecoins can give you some relief because these coins do not fluctuate much and they are less volatile that bitcoin. Stablecoins are backed by fiat currencies and metals, such as gold.
Digital currencies are based on a decentralized network and stablecoins is not an exception, but stablecoins is similar to fiat currencies like Euro and Dollar. Apart from that, it is easier to exchange such coins because these coins are stable than other crypto currencies and you can treat such coins as an alternative of fiat currency.
Different types of StableCoins:
As stated above that StableCoins are backed by assets and you can find such coins in different types. Basically, they are backed by different types of assets such as fiat currency, metals etc. Here, you can find such coins:
- There are a few stablecoins available which are backed by fiat currencies. For example, Tether is backed by US dollar and it is linked in a ratio of 1:1 fiat currency. Here a financial custody or regular audit is required because fiat currency is collateralized with this coin.
- There are some non-collateralized stable coins available, which are based on a Seigniorage Shares system. Seigniorage is the amount that is required for printing the fiat currency. Such stablecoins are based on an algorithm which can decide the price of these coins, and if the value of the pegged currency decreased then the value of such stablecoins will be automatically decreased. Even, the supply of such stablecoins can be reduced or stopped while the price of the pegged currency is decreased.
- Apart from that, there are some stablecoins available which are backed by crypto currencies. They are similar to other crypto currencies. For example, a stablecoin can be backed by Ethereum into 1:1 ratio. So, the value of such stablecoins will be decided on the basis of the value of the crypto currency that is used as collateral.
- You can also invest in stablecoins which are backed by metals. There are some stablecoins available which are backed with commodities, such as gold. So, the value of such coins is based on such metals and you need to keep your eyes on the price of such metals if you invest your funds on these coins.
Wealthy investors always choose such precious metals for their investment because they can diversify their portfolio by adding such physical assets like gold and real-estate properties. In this case, you need to bear an additional charge for storage and maintenance of such commodity. You can avoid such hassles by using stablecoins because they are backed with these commodities and you can get the same value like gold and other precious metals. However, investing any additional amount for this reason is not required. Moreover, you can convert your coins or sell your coins anytime for an emergency, which you cannot do with your assets.
You must choose a platform where crypto currencies and stablecoins are available because you can use such a platform to invest your funds in different types of digital assets and you do not need to deal with multiple crypto accounts. In this case, you can use Bitcoin Era app where you can find such coins with real-time market insights.
