Benzinga’s top picks for the best stablecoins this month include Tether, USD Coin, Binance USD, True USD, Origin Dollar and Binance USD, which are available on crypto exchanges like eToro, Coinbase and Kraken.
Stablecoins are a type of cryptocurrency that mirrors another asset in order to reduce volatility. They are pegged to stable assets or backed by an algorithm. Stablecoins became popular after the 2017 cryptocurrency boom, as investors sought a less volatile store of value. This led to interest from central banks and governments in developing their own digital currencies.
Stablecoins offer investors a stable asset within the crypto space, allowing for faster transactions and easier compliance with regulations. The Gemini Dollar (GUSD) and the Paxos Standard (PAX) are two examples of coins to win the regulatory approval of the New York State Department of Financial Services.
Investing in stablecoins can be a smart way to diversify your investment portfolio and protect against volatility in the cryptocurrency market. Look for stablecoins that are fully collateralized, audited regularly and backed by trustworthy institutions. Additionally, consider factors such as fees, liquidity and the potential for regulatory scrutiny before making any investment decisions. In this article, Benzinga reviews the top stablecoins available in the market today.
Quick Look at the Best Stable Coins Today:
- Tether (USDT)
- True USD (TUSD)
- Paxos Standard (PAX)
- USD Coin (USDC)
- Binance USD (BUSD)
- Origin Dollar (OUSD)
The Best Stablecoins Right Now
With the number of stablecoins growing, it is good to have a grasp of the most useful and well anchored choices. Here are the top stablecoins today by market capitalization.
1. Tether (USDT)
So named because it “tethers” itself to the value of the USD, Tether is the most well-known stablecoin in the crypto world. It’s backed by gold, traditional currency and cash equivalents.
Tether is also known for its security and smooth integration with crypto to fiat platforms. It is easily the largest stablecoin but it is also often considered the most risky due to its suspicious past. It was caught lying to the public by the New York Attorney general, saying that it held USD reserves matching 1:1 to the amount of USDT. It was forced to reveal the composition of its true reserves soon after.
Tether (USDT) is currently trading for around $1.00 with a market capitalization of over $115 billion.
2. True USD (TUSD)
True USD (also represented as “TrueUSD”) is 100% backed by the U.S. dollar and is one of the most liquid stablecoins on the market. The coin offers lower transaction fees than wire transfers of fiat currency and higher interest rates on stored balances.
The company behind True USD, TrustToken, also has stablecoins pegged to other major currencies — TrueAUD, TrueGBP and TrueHKD, to name a few.
True USD (TUSD) is currently trading for around $0.9996 with a market capitalization of over $495 million.
3. Paxos Standard (PAX)
Paxos Standard aims to keep 1:1 parity with the U.S. dollar. It was created as an answer to the Tether printing controversy, which saw Tether come under fire for an unverified claim that it held $1.8 billion with Deltec Bank & Trust Ltd to back its stablecoin.
PAX is currently trading for around $1.00 with a market capitalization of over $111 million.
4. Binance USD (BUSD)
Not to be outdone, crypto exchange Binance also released a Binance USD, which is pegged 1:1 to the U.S. dollar. BUSD is on the Binance Smart Chain (BSC) network, an alternative to Ethereum. BUSD is commonly used in the decentralized finance (DeFi) scene on BSC and to trade between BSC cryptos.
Binance USD (BUSD) is currently trading for around $1.00 with a market capitalization of over $69 million.
5. USD Coin (USDC)
USD Coin was launched by Circle, a fintech company, in partnership with Coinbase, a popular cryptocurrency exchange. The main purpose of USD Coin is to provide a reliable and stable digital currency that can be used for transactions, trading and as a store of value.
The company behind USDC conducts regular audits to ensure that there are enough actual US dollars to back the tokens. The transparency and accountability provide peace of mind to users. Additionally, USD Coin can be used for various purposes like cross-border payments, remittances and online purchases. It is supported by numerous platforms, making it easy to buy, sell and use.
USD Coin (USDC) is currently trading for around $0.9999 with a market capitalization of over $34 billion.
6. Origin Dollar (OUSD)
Origin Dollar's OUSD is unique in that it's backed by the top stablecoins currently on the market –– USDC, DAI and USDT. This way, investors can diversify the risk of any one stablecoin de-pegging from USD. Moreover, it's a great option for investors who want to invest over the long-term and not actively manage their portfolios. OUSD lets users earn interest directly from the wallet, as its DAO governs which protocols (Aave, Curve, Convex and Compound) funds are deployed to on a regular basis. OUSD is available to investors on Gate.io and KuCoin.
Origin Dollar (OUSD) is currently trading for around $0.9971 with a market capitalization of over $7 million.
Types of Stablecoins
Stablecoins can be classified into four distinct categories based on the method employed to stabilize their value.
Commodity Backed Stablecoins
Commodity-backed stablecoins are stabilized with hard assets such as gold or real estate. The most commonly used asset to collateralize stablecoins is gold, although many use diversified baskets of precious metals.
Fiat Backed Stablecoins
Stablecoins backed by fiat currencies like Chinese Yuan keep a reserve of that currency as collateral. Other forms of fiat include precious metals such as platinum or silver and commodities such as corn or oil.
Most fiat backed stablecoins are backed with dollar reserves. The reserve for the currency is administered through an independent custodian that is audited on a scheduled basis to ensure compliance.
Crypto Backed Stablecoins
Crypto can back other cryptocurrency as well. Such is the case with crypto backed stablecoins. To counteract the higher relative volatility of backing stablecoins through crypto, the coin will often maintain an overcollateralized position. This insures that the stablecoin will hold its intended value (often $1) even when the value of the cryptocurrencies backing the coin fall precipitously.
In other words, the stablecoin will circulate a much lower supply against the reserve as compared to fiat backed currencies. For instance, a crypto backed stablecoin may issue only $500 worth of coins for every $2,000 of crypto in reserves rather than keeping a 1-to-1 ratio.
Algorithmic Stablecoins or Siegniorage Style Stablecoins
Siegniorage are governed through and backed by an algorithm or process rather than another asset or currency. The idea of siegniorage as backing came from a whitepaper from noted cryptographer Robert Sams. Sams puts forward the idea of a Federal Reserve coin (fedcoin) that could function as such. Smart contracts deployed on decentralized platforms could serve as an autonomous “backer” for these kinds of coins.
Trade or Invest in Stablecoins
Every sophisticated crypto trading platform allows access to stablecoins alongside unpegged cryptocurrencies. Whether you are an active trader or a long term investor, having this tool available is a smart option for preserving wealth and stabilizing portfolio value. Here are a few of the best cryptocurrency exchanges to consider trading on:
Pros and Cons of Investing in Stablecoins
Like any form of crypto, stablecoins come with a unique set of advantages and disadvantages.
Pros
- Stablecoins retain the power of all cryptocurrencies to move without regard to physical borders.
- Transactions do not require third-party verification and therefore are faster and fee-free compared to traditional processes.
- Transactions using stablecoins are transparent on a public ledger, unlike fiat currency.
Cons
- Unlike some cryptocurrencies, stablecoins are mostly created by centralized organizations that own the currency. Even DAI, a well-respected stablecoin that markets itself as decentralized, has faced scrutiny for its centralized organization.
- Stablecoins require audits by third parties, which can create conflicts of interest and go against the idea of being decentralized, trustless, or pseudonymous.
- Stablecoins do not offer the same high return on investment potential as unpegged cryptocurrencies.
Using Stability to Create Profitability
Most crypto investors would probably agree that having a stablecoin or two in your portfolio is a good way to diversify and protect yourself. If you are actively trading volatile altcoins, you can also use the stablecoin to move quickly out of falling assets and repurchase at a better price.
Will the stablecoin completely disrupt the crypto space? A complete takeover is unlikely because the purpose of the stablecoin and the unpegged cryptocurrency are two different things. A more likely scenario is that stablecoins serve as another financial vehicle in the digital transformation of money. Stablecoins can provide liquidity to markets of exchange, serve as a medium of exchange for risk averse investors and protect physical assets in the digital realm.
Frequently Asked Questions
Which is the best stablecoin to buy?
The best stablecoin to buy depends on security, transparency and regulatory compliance. Popular options include Tether, USD Coin and DAI, each with their own advantages and drawbacks. Ultimately, the choice comes down to personal preferences and investment goals.
What is the most trustworthy stablecoin?
Tether (USDT) is considered the most trustworthy stablecoin, backed by actual reserves at a 1:1 peg to the US dollar. Despite controversies, Tether remains widely used. Other stablecoins like USD Coin (USDC) and Dai have also gained credibility. Trust in stablecoins varies based on individual preferences and risk tolerance.
Which is better, USDC or USDT?
The choice between USDC and USDT depends on personal preference and specific needs. USDC is transparent and regulatory compliant, backed by US dollars held in reserve. USDT is more widely used, but has faced controversy over its reserves. It is important to consider factors like security, trustworthiness and liquidity before choosing a stablecoin.
What stablecoins are backed by USD?
Stablecoins like Tether, USD Coin, TrueUSD and Paxos Standard are backed by USD on a 1:1 ratio for stability and trust in their value.