Stablecoins are getting increasingly popular year by year. They combine the best characteristics of fiat money and cryptocurrencies. On the one hand, stablecoins have more or less predictable prices as they are usually pegged to fiat currencies. So these stablecoins are less volatile than usual cryptocurrencies. On the other hand, stablecoins are still cryptocurrencies, so they are suitable for nearly instant cross-border transactions and don’t depend on banks and governments.
However, not all stablecoins are pegged to fiat money. Several notable projects are the tokens, pegged to precious metals, cryptocurrencies, and other assets. In this article, we will observe the best stablecoins worth your attention if you want to add some stablecoins to your portfolio. We will speak about worthy stablecoins and review some of the best coins of different types. Read the article in its entirety to learn which stablecoins will be the best in 2023!
Stablecoins: What You Need to Know?
Volatility has been a frequent argument in the rhetoric of crypto skeptics. It’s clear that not everyone is willing to be paid in a currency whose price may decrease severely in a short period of time. And not everyone will eagerly give their money, knowing that the buying power of this money can unexpectedly skyrocket the next day. Stablecoins addressed this issue. The American dollar is quite a stable currency. That’s why most of the popular stablecoins are pegged to USD. However, many stablecoins are pegged to other assets.
Stablecoins Are Becoming More Popular
Cryptocurrencies have become more popular, but their prices have decreased concerning the USD. It’s not hard to grasp why stablecoins pegged to fiat currencies (mainly USD) are popular. For those who don’t want to deal with crypto tokens’ volatile prices, stablecoins are assets that have a predictable price while not sacrificing the general characteristics of cryptocurrencies. That’s an easy entry point to the world of crypto assets and all operations involving cryptocurrencies.
Stablecoins involve lower risks compared to investing in other cryptocurrency types. Also, they allow using crypto as regular currency. In the exchanges that don’t support fiat money, stablecoins can serve as liquidity indicators and replace functions of fiat money. Fiat money-pegged stablecoins are more transparent than other cryptocurrencies due to ties with banks. It makes such stablecoins an easy option for institutions to dive into the crypto market. In diversified portfolios, stablecoins can serve as a risk management tool. Another use case is access to open banking systems.
Types And Categories of Stablecoins
Stablecoins are differentiated based on the asset type they are pegged to.
In this article, we will cover four basic types of stablecoins:
- Fiat backed stablecoins
- Crypto backed stablecoins
- Algorithmic stablecoins
- Commodity backed stablecoins
The most popular stablecoins are pegged to USD, so they are fiat-backed stablecoins. However, some popular projects use crypto collateral. One example is DAI. Algorithmic stablecoins rely on multiple automatic operations inbuilt into their protocols. Algorithmic stablecoins are more volatile than stablecoins of other types. Finally, commodity-backed stablecoins use commodities (gold, real estate, precious metals, baskets, etc.) as collateral.
What Are the Best Stablecoins?
Now, let’s explore the best stablecoins to date. We will use different characteristics as factors. One of the main characteristics is the ability to maintain a constant price. However, other features will be taken into consideration, as well. We’ll split our list of the best stablecoins by type.
Best Fiat-Backed Stablecoins
First, we will observe the most demanded stablecoins — ones backed with fiat money.
Tether (USDT)
Tether (USDT) is one of the first stablecoins ever. It was launched as early as 2014. As of 2023, it is the leading stablecoin in terms of market cap. Tether has been one of the top 5 cryptos by market cap for several years. The Tether’s price is pegged to the USD in a 1:1 ratio. Allegedly, the company behind Tether backs all units with American dollars. Yet, these claims are questioned by law enforcement. The price has been stable most of the time, with a few instances of short price decline.
USD Coin (USDC)
USD Coin (USDC) is another USD-pegged stablecoin (1:1 ratio) that made its way to the top 5 cryptos by market cap. USDC is a project of Coinbase and Circle. Fiat money reserves and US treasuries back the USDC supply. Coinbase is one of the leading cryptocurrency platforms in the world, therefore, undoubtedly, USDC will be a worthy investment in 2023.
Binance USD (BUSD)
Binance USD (BUSD) is another popular stablecoin pegged to the USD in a one-to-one ratio. This coin is a product of Binance, a crypto exchange with the most significant trading volume. The exchange incentivizes traders to use its branded coins, so BUSD gets a constant huge boost. In terms of market cap, BUSD is one of the top ten cryptocurrencies.
True USD (TUSD)
True USD (TUSD) is a USD-pegged stablecoin that hit the market in 2018. The collateral behind TUSD is distributed between several bank accounts owned by trust companies. TUSD has been effectively maintaining the 1 to 1 ratio with the USD for years. As for the market cap, TUSD is among the top 50 cryptocurrencies.
Best Crypto-Backed Stablecoins
Single cryptocurrencies or baskets of crypto assets back some stablecoins.
Dai (DAI)
Dai (DAI) is the most popular stablecoin backed by crypto. The Maker DAO organization is responsible for the development of Dai. The price of DAI is pegged to the USD price but is collateralized by Ethereum-based tokens. Multi-collateralized DAI was launched in 2019. Dai is one of the cryptos with the largest market cap. As of early 2023, it occupies a position below the first ten cryptos.
Magic Internet Money (MIM)
Magic Internet Money (MIM) is a stablecoin soft-pegged to the American dollar in a 1-to-1 ratio. The asset was introduced in 2021 by the Abracadabra Money crypto lending platform. Besides episodic tiny drops or surges, MIM successfully maintains the $1 price.
Reserve Rights (RSV)
The Reserve token (RSV) is a crypto-backed stablecoin introduced by the Reserve Ecosystem in 2020. Initially, the price wasn’t that stable, but closer to the end of 2021, it finally calmed down. Since late 2021, the RSV price has been around $1.
Best Algorithmic Stablecoins
Some developers strive to create stablecoins that won’t need human supervision to keep a stable price. This led to the creation of algorithmic stablecoins.
Neutrino USD (USDN)
Neutrino USD is one of the most popular algorithmic stablecoins. As of early 2023, USDN is among the top 100 cryptocurrencies by market cap. The token was pegged to the USD in a 1-to-1 ratio. However, it depegged in the fall of 2022. Despite this, the coin is still actively subjected to trading. Its price drop from $1 to 50 cents can be seen as a buying opportunity. However, we can’t call Neutrino a stablecoin without reservations anymore. One of the reasons why people continue investing in USDN after depegging is that Neutrino has use cases. For instance, it has an attractive decentralized forex platform (DeFo).
Decentralized USD (USDD)
Decentralized USD (USDD) is a popular semi-algorithmic stablecoin. Tron launched it in 2022. The TRON DAO Reserve provides collateral consisting of several crypto assets. As of early 2023, Decentralized USD is one of the 50 biggest cryptocurrencies in terms of market cap.
Best Commodity-Backed Stablecoins
In some way, cryptocurrencies are meant to be “better money.” In the past, fiat money had intrinsic value as it was backed by gold or other precious metals. Now, commodity-backed stablecoins are reviving this practice.
PAX Gold (PAXG)
Pax Gold (PAXG) is a stablecoin backed by gold. This cryptocurrency’s large market cap grants it a position in the top 100 cryptocurrencies. In two years, Pax Gold became the most significant commodity-backed stablecoin.
Conclusion
The crypto market is ever-changing, so it’s always better to keep your eye on new projects. Don’t forget to do your own research before you invest money in any of these projects.
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