6 Best Stablecoins To Invest In 2022 – Types of Stablecoins

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Best Value

Tether (USDT)

Tether (USDT)

  • Requires third-party audit
  • Less vulnerable to hacks
  • Medium of exchange
  • It bridges the gap between cryptocurrencies and fiat.

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Most Easy

True USD (TUSD)

True USD (TUSD)

  • Higher interest rates 
  • Low transaction costs
  • High data transparency
  • Simple and relatively easy to understand

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Paxos Standard (PAX)

Paxos Standard (PAX)

  • No translation fees
  • Available on all exchanges
  • Less return on investment

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The rise of cryptocurrencies has allowed investors to perform faster transactions and with minimal fees. However, a Volatile market makes it challenging to use crypto as an accepted payment gateway. Stablecoins solve this problem, providing protection against crypto volatility. They are designed to maintain a fixed value while tied to an underlying asset, like fiat currency. Recently, stablecoins have become an increasingly popular avenue for investors and companies interested in cryptocurrencies. Unlike other coins that fluctuate with the asset price, stablecoins are pegged to a less volatile asset. In this article, we discuss the six safest and top stablecoins you can invest in in 2021.

Types of Stablecoins

  • Commodity-backed stablecoins

They are stabilized with hard assets such as gold, real estate, and other precious metals.

  • Fiat-backed stablecoins

These stablecoins keep a reserve of the traditional currency as collateral. A central authority created the stablecoin while the reserve for the currency is administered through an independent custodian.

  • Crypto-backed stablecoins

They are backed by crypto and maintain an overcollateralized position.

  • Seigniorage-style stablecoins

These are governed through and backed by an algorithm rather than real world assets or currency.

The Lineup At A Glance

Tether (USDT)

Editor’s Choice

Tether (USDT)

  • Requires third-party audit
  • Less vulnerable to hacks
  • Medium of exchange
  • It bridges the gap between cryptocurrencies and fiat.

True USD (TUSD)

The most liquidity

True USD (TUSD)

  • Higher interest rates 
  • Low transaction costs
  • High data transparency
  • Simple and relatively easy to understand

Paxos Standard (PAX)

Transacting with blockchain

Paxos Standard (PAX)

  • No translation fees
  • Available on all exchanges
  • Less return on investment

USD Coin (USDC)

Highest crypto trading volume

USD Coin (USDC)

  • Backed by fiat
  • No translation fees 
  • High transparent funding 
  • High speed and reliability

Binance USD (BUSD)

Medium of exchange

Binance USD (BUSD)

  • It’s a medium of exchange
  • High level of customer protection
  • No transaction fees

TerraUSD UST

High transparency

TerraUSD UST

  • Has scalable monetary policy
  • Fast, secure, and liquid payment method
  • It uses a Schelling point scheme 
  • IOU systems support a vast ecosystem

 6 Best Stablecoins To Invest In in 2022

Tether USDT

Tether was the first major Stablecoin that was adopted by exchanges and investors. It is backed by a commodity and requires a custodian to regulate the currency. Tether has a market cap of over $68 billion.

  • It is highly secure and less vulnerable to hacks
  • Users can withdraw and deposit real USD
  • It bridges the gap between cryptocurrencies and fiat
  • You can convert your money into other assets without going through Bitcoin or other cryptocurrencies
  • Transparency issues: Tether was chastised for claiming to have $1.8 billion in the bank accounts of Deltec Bank & Trust Ltd. to back its stablecoin

Each tether is backed by one US dollar for a token issued. Each US dollar supports tether[1], providing a 1:1 conversion. Hence, you can redeem each coin for one US dollar. The circulating supply of USDT tokens grows or shrinks based on the money held in bank accounts. It provides security for the investors by protecting them from price crashes due to high volatility. Also, the involved parties perform regular data auditing and have high transparency funding. A third party is responsible for auditing the firm to ensure the correct amount of stablecoins enter circulation.

True USD

This is a fully collateralized and legally protected ERC-20 token pegged to the U.S. dollar while maintaining a 1:1 ratio. It is designed to be simple, transparent, and reliable, thus doesn’t use any special algorithm.

  • It has lower transaction fees
  • Higher interest rates on capital balance 
  • Maintains a high data transparency
  • Simple and relatively easy stablecoin to understand
  • Highly regulated and vulnerable to government intervention

This is a stable cryptocurrency based on the TruskToken platform. It focuses on building a stable coin that can be trusted and quickly adopted by traders. The US dollar holdings of true USD are distributed in various bank accounts belonging to different trust companies. Every involved party publishes the collateralized holdings daily and conducts monthly audits. The tokens use multiple escrow accounts to lower the counterparty risk and provide legal protection against theft.

Paxos Standard

Paxos Standard is programmable, based on the ethereum network. It is one of the best fiat-collateralized stablecoin when it comes to removing cross-border transaction fees. It focuses on creating a future where digital assets, securities, and commodities are transferred anywhere at any time.

  • There is no fee for PAX conversion or transaction
  • One of the most liquid on the market
  • Available on all exchanges
  • The 1:1 stability mechanism reduces the chances of high volatility
  • Requires third-party auditing

PAX is a well-known fiat-collateralized stablecoin collateralized by fiat money held in actual banks. It was created by Paxos, a New York regulated financial institution. The Paxos Standard tokens are collateralized 1:1 by USD held in Paxos-owned US bank accounts. This stablecoin is approved by Wall Street regulators, making it a secure stablecoin to use. It improved the more prominent financial ecosystem by getting a frictionless global network to mobilize a digital asset with more speed and flexibility.

USD Coin

USD coin is a new USD-dominated stablecoin and one of the best coins to use. It is crypto-backed stablecoin, collateralized by real-world crypto assets that initially operated on the Ethereum blockchain. This stablecoin provides safe and secure transactions.

  • It’s pegged with USD 1:1
  • No fees associated with creating or redeeming coins
  • High transparent funding and auditing process
  • Offers high speed and reliability
  • External auditing needed

This is one of the few stablecoins, alongside a Gemini dollar, backed by US dollars held in FDIC-insured US banks. It is regulated by the New York State Department of Financial Services to ensure utmost customer protection. It uses Solana and Algorand blockchains. USD coins are popular because they have better transparency, auditing, and high reliability. It is a  proper way to trade an asset based on the monthly market supply of tokens and underlying US dollars.

Binance USD

Binance is a popular stablecoin backed on a 1:1 basis with the US dollar. It ensures faster ways to fund your transactions as a medium of exchange. The idea is to sustain an enduring value over a prolonged period of time.

  • It can be used as a medium of exchange
  • Banance is approved and regulated by the New York State Department of Financial Service
  • It ensures the highest level of customer protection
  • You don’t have to pay any fees when creating or redeeming BUSD
  • Lacks transparency and requires regular audits to ensure transparency

BUSD is a regulated stablecoin fully backed by US dollars. It was created through a partnership between Binance Exchange and the Paxos Trust Company. This is an excellent tool to hedge against market volatility and enter markets without buying into the ethereum network. It is designed to maintain a 1:1 parity with the US dollar and maintains value for a long time. You can take advantage of the benefits offered by blockchain technologies on the settings page without the massive price fluctuations. You can also use this stablecoin as a method of payment in the global crypto space. 

TerraUSD

TerraUSD (UST) is a stablecoin that seeks to benefit users with a variety of features. It’s famous for its mostly-infinite,  scalable monetary policy. This stablecoin offers a scalable experience to the market amidst the severe scalability issues facing conventional chains.

  • It has a scalable monetary policy
  • Fast, secure, and liquid payment method
  • It uses a Schelling point scheme as decentralized solutions
  • IOU systems can grow to support a vast ecosystem
  • Need a trusted custodian to store the fiat money

Tera has grown over 2,000% in the past year, attesting to its popularity. It is a decentralized[2] stablecoin running on ethereum while attempting to maintain a value of $1.00. This stablecoin is known as an algorithmic stablecoin since the cost of minting is equal to the face value of the minted stablecoins. UST is not backed by US dollars in a bank, unlike other centralized stablecoins. Instead, you must burn $1.00 worth of TerraUSD’s reserve asset (LUNA) to mint one TerraUSD.

What is Stablecoin?

Stablecoin is a form of cryptocurrency with a stable price and can be measured in terms of fiat currency. Its market value is pegged to the value of a less volatile external asset like fiat currencies. Stablecoins retain the same worth as their underlying stable asset instead of going through dramatic price swings. Since they are expressed in dollars, you can maximize your chance of protection from market fluctuations.

Trade or Invest in Cryptocurrency Financial Services

Cryptocurrency exchanges are highly volatile, with price fluctuations that make them unstable. However, stablecoins are an excellent option for less volatile crypto exchanges. Most stablecoins provide a stable unit of worth on decentralized exchanges and offer a private mode of storage. Since reserve assets back them, it keeps the prices stable and not on the same level of volatility as other cryptocurrencies. However, stablecoins aren’t all created equal, and not all stablecoins are 100%t price-stable. Trade the stablecoin tokens by size as they are listed by their market capitalization, and work with an investment advisor for any investment advice.

Advantages vs. Disadvantages

The major advantage of stablecoins is the very low volatility that makes them convenient for real-life payments. Stablecoins are centralized and easier to bridge from fiat to crypto exchanges. They have low fees and secure transactions since fiat-related regulatory processes are involved. You can buy stablecoins directly when not at the peak of a bubble for it to pop on you.

However, stablecoins are pegged to a nation’s currency, which can suffer inflation. They also need third party auditing and trust from an entity to ensure assets are accounted for. Also, stablecoins have a low return on investment, which may not please crypto investors who desire higher returns. They are also regulated similarly to traditional currencies.

Using Stability to Create Profitability

Price instability is one of the biggest obstacles standing in the way of the widespread adoption of cryptocurrencies. You can use stablecoins as a hedge against inflation and create profitability. They have price stability with inflation-resistant fiat currencies. For example, you can generate profitability with stablecoins through lending and staking, where you earn interest payments from borrowers or earn interest by staking. Also, look at price differences at the same time and make exchanges when the prices are lowest.  For example, you can exchange stablecoins for ETH and other ethereum tokens.  

Frequently Asked Questions

What are stablecoins?

These are digital currencies that are backed by a physical object,  usually a fiat currency. They are less susceptible to price changes.

How do stablecoins affect cryptocurrency prices?

Stablecoins enable more people to access the benefits of blockchain without the risk of dramatic price swings.

How do stablecoins work?

Stablecoins are described as IOU since you use your money to buy stablecoins then redeem them later for your original currency.

Are stablecoins worth considering?

If you don’t know much about blockchain technology and what to do with changes in market conditions, keep your digital assets in stablecoins due to their low volatility.

How do stablecoins remain stable?

Stablecoins are pegged to a currency like the U.S. dollar or a commodity’s price, such as gold and other precious metals. They achieve price stability via collateralization or through algorithmic mechanisms of buying stablecoins.


+ 2 sources

  1. Tether. (2014). Tether. [online] Available at: https://tether.to/ [Accessed 2 Nov. 2021].
  2. Klagge, B. and Martin, R. (2005). Decentralized versus centralized financial systems: Is there a case for local capital markets? [online] ResearchGate. Available at: https://www.researchgate.net/publication/5213337_Decentralized_versus_centralized_financial_systems_Is_there_a_case_for_local_capital_markets [Accessed 2 Nov. 2021].

Written by:

Billy Graham

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