Are Stablecoins a worthy crypto investment?

view of a screen with stock exchange type view with a stablecoin in the middle

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Crypto investments are popular, but their volatility may present concerns to low-risk investors. The value of popular crypto coins like Bitcoin can fluctuate within months, days, or even hours. For instance, in November 2021, Bitcoin was worth $65,000+. Today, BTC sits at around $51,000. Bitcoin’s value also increased by more than 100% within 10 days in November 2022.

While this fluctuation presents opportunities to make huge profits, it can also translate to massive losses. Investors looking for more stable crypto investments may look into stablecoins. Here’s an overview of the main differences between conventional cryptocurrencies and stablecoins and a look at the investment potential of stablecoins.

How are Stablecoins different from other cryptos?

Stablecoins refer to cryptocurrencies with values tied/pegged to solid, stable assets like gold or the dollar. Popular stablecoins include Tether, Venus USDT, TrueUSD, Binance USD, Dai, Venus USDC, USD Coin, Pax Dollar, BIDR, and Celo Dollar. Most cryptocurrencies have their values pegged to the dollar at a 1:1 ratio. This means one Tether coin is always worth 1 UD dollar.

Pegging Stablecoin values to the dollar or gold results in a more stable currency immune to the volatility reflected by other cryptocurrencies. Stablecoins may still go down or up in value depending on the commodities they are pegged to. For example, if the value of gold or the US dollar goes up, the value of stablecoins pegged to those commodities will also increase.

Stablecoins are perfect credit instruments and are suitable for standard transactions. They have become popular in online casino sites, where players use them to complete deposits and withdrawals. Unlike other cryptos, stablecoins present a more stable value in the short term. Players can enjoy real money betting and leave their funds in the casino account without worrying about losing value when they convert the coins to FIAT.

Do Stablecoins provide investment opportunities?

It may take several weeks or months for the value of gold, USD, or other stable commodities to rise or drop. As such, stablecoins barely see any movement, which makes them ideal for crypto trading. However, most investors don’t see stablecoins as worthy candidates for long-term investment. The coins generally don’t rise in value. Nonetheless, stablecoins provide valid investment opportunities, from earning passive income to protecting investors from taxes.

1. Earning Passive Income

Stablecoin investors can earn passive income through crypto staking. Many platforms offer staking opportunities on various stablecoins, including USDT and USDC. Staking involves buying and holding a given amount of stablecoins for a specified duration. After the specified term, you’ll earn a fixed interest. Most exchanges and investment sites offer predictable interest rates of between 3% and 20%.

The more stablecoins you hold, the more interest you attract. Staking stablecoins for longer periods also attract better rates. For instance, you can get 14% on USDT staking if you purchase $40,000 worth of the tokens and lock it in for at least one month. You can still earn passive income from staking a lower amount, but the interest won’t be as high. USDC staking also offers interests of up to 8.5% at Crypto.com.

You can stake several stablecoins and fetch good interest rates from your investment. All you need to do is find investments with great interest rates. You’ll also need a reliable staking partner with transparent terms. Crypto.com, Binance, and Ledger all provide staking opportunities and lending pools that you can use to fetch passive income from your stablecoins.

2. Maintaining Investment Value

Stablecoins are a store of value because they’re pegged to stable assets. When crypto markets and other investments are in a downward spiral, you can trust stablecoins to maintain value. Stablecoin investments protect you against volatility and sudden crashes. You can convert a portion of your crypto investments to stablecoins to avoid losses. In fact, you can increase the value of your assets by choosing stablecoins during tough economic times.

For instance, when cryptocurrencies are losing their value, investors will rush back to gold and other stable investments. This may temporarily increase the value of gold and such commodities. If your stablecoin is pegged to the value of gold, its value will also increase. Stablecoins are usually tied at a ratio of 1:1, so they’ll assume the value of the commodity they’re pegged against.

What’s more, stablecoins protect you from having to exchange your assets against actual cash. This can have positive tax implications when trying to mitigate risks during volatile crypto markets. Stablecoins are also highly liquid and easy to cash out. Most crypto exchanges require cryptocurrencies to be converted to stablecoins before they’re liquidated to cash. This means you can quickly exchange your stablecoins for cash.

Final Words on Stablecoin Investments

Contrary to popular belief, stablecoins are a worthy investment with many profitable avenues. Staking is the popular way to earn passive income from stablecoins. However, you can also leverage lending pools to fetch interest from borrowers. Moreover, you stand to gain if the economy grows and the US dollar or gold value goes up. That said, stablecoin investments require careful research into the staking platforms, interests, and terms. You may also need to wait a considerable time to fetch a significant return on your investment.

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WARNING: The investment in crypto assets is not regulated, it may not be suitable for retail investors and the total amount invested could be lost

AVISO IMPORTANTE: La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido

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