Stablecoins to Look Out for In The Next Bull Run

 

Leading French bank Societe Generale recently launched its native euro-pegged stablecoin, the EUR CoinVertible (EURCV). The Ethereum (ETH)-based stablecoin will be traded on Bitstamp, a Luxembourg-based cryptocurrency exchange, reported the Financial Times.

It is for the first time that a euro-pegged stablecoin issued by a traditional bank is being traded on a cryptocurrency exchange. It is self-evident that Europe is trying to catch up with the excitement generated by the stablecoin market in the U.S.

In fact, the stablecoin market cap stands at $130 billion at the time of writing.

Stablecoins are meant to bring a certain level of predictability to the uncertain world of cryptocurrency. The asset class has become a favoured choice among crypto enthusiasts due to its relatively lower price volatility amid an extremely dynamic market. It is advised for traders to diversify their crypto portfolio to include stablecoins to minimise the risk factor.

In this article, we explain what stablecoins are, and which stablecoins BitDelta traders should look out for in the next bull run.

What Are Stablecoins?

As the name suggests, stablecoins are cryptocurrencies the value of which is generally stable as compared to other cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH).

Read More: Ethereum Explained

The value of stablecoins is pegged to that of:

• a fiat currency (such as the USD)
• another cryptocurrency (such as ether)
• a commodity (such as gold)
• or an algorithm

The stablecoin issuer is supposed to maintain price stability by keeping reserve assets as collateral or through algorithmic formulas that are meant to control supply.

The price stability of stablecoins makes them attractive to those traders who want to wade into uncharted territory of cryptocurrencies but don’t want to take unnecessary risks.

To give a perspective, a cryptocurrency such as BTC often swings by as much as 10%-20% within a few hours. In contrast, a stablecoin is able to keep its price stable for months along the price of the asset it is pegged to.

You can buy a stablecoin from any trusted exchange and store it in your crypto wallet. You can transfer it to anybody, a friend or a family member, through the wallet. These transfers are called peer-to-peer (P2P) transfers as they don’t need any third-party intermediary such as a bank for validation.

This way, you don’t need to pay any transaction or administrative fees, making stablecoins an attractive choice for cross-border payments.

Stablecoins to look out for in the next bull run:

1. USDT

Issued by Tether, USDT is a pioneering stablecoin pegged to the USD with a 1:1 ratio. Launched in 2014, it is the most popular and adopted stablecoin.

The stablecoin issuer Tether Ltd. claims to keep an amount of fiat currency (in USD) in reserve that is equivalent to the amount of USDT stablecoins in circulation. It has been largely successful in maintaining its price stability.

The market cap of USDT has grown by 4.2% over the last days to $90.59 billion amid the ongoing bull run.

 

Source: USDT market cap, Coingecko

2. USDC

Launched in 2018, USD Coin (USDC) is a stablecoin pegged to the USD with a 1:1 ratio. The Centre Consortium, founded by crypto exchange Coinbase and P2P payment services provider Circle, is behind the project.

For every USDC stablecoin in circulation, the Centre Consortium keeps $1 in reserve, in a mix of cash and short-term U.S. Treasury bonds.

Its market cap at $24 billion is nearly the same as it was a month earlier, with its highs and lows.

 

Source: USDC market cap, CoinGecko

3. DAI

Launched in 2019, DAI is a stablecoin issued by the Maker Protocol and MakerDAO which follows a complex history of collateralisation.

At first, the Single Collateral Dai (SAI) was put in circulation that used ETH as collateral. It was later phased out and replaced with DAI which uses a unique mix of cryptocurrencies as collateral.

This unique feature makes DAI insular from risks rising from a particular cryptocurrency it is pegged to as other tokens quickly manage to stabilise it.

Within the last 30 days, the market cap of DAI has grown by a modest 1.8% before faltering to $5.36 billion as we write.

 

Source: DAI market cap, CoinGecko

4. TUSD

Built on Archblock (formerly known as TrustToken), TrueUSD (TUSD) is a stablecoin pegged to the USD with a 1:1 ratio.

Launched in 2018, the TUSD stablecoin has gained the confidence of traders due to its highly transparent operations. Its live on-chain attestations are published by independent, industry-specialised third-party institutions.

However, not all is well with TUSD as it has been facing difficulty in stabilising its price around $1. In addition, its market cap has dropped by more than 20% over the last 30 days to $2.61 billion. Even then, it is among the most popular and reliable stablecoins in the crypto market.

 

Source: TUSD market cap, CoinGecko

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5. BUSD

Launched in 2019, BUSD is a stablecoin issued by the world’s leading crypto exchange, Binance, in collaboration with Paxos, a regulated entity. Pegged to the USD with a 1:1 ratio, BUSD is trusted among users due to its usage as a reliable trading and investment asset.

One of the most attractive features of the BUSD stablecoin is its quick speed in facilitating transactions at low transaction costs.

Due to the recent occurrences at Binance, we have witnessed the market cap of BUSD dropping by more than 20% over the last 30 days to $1.46 billion.

 

Source: BUSD market cap, CoinGecko

How Should BitDelta Traders Deal with Stablecoins?

It is recommended for BitDelta users to deal in stablecoins with caution. It is best to educate yourself using reliable resources, including the BitDelta Academy.

Stablecoins can act as a reliable store-of-value asset class if traders invest in it in a prudent manner. Due to their relative price stability, they are popular among newer entrants to the crypto market.

However, keep in mind that stablecoin projects such as Terraform Labs’ UST depegged in 2022 as its complex peg system, involving a reserve asset called Luna, failed.

In the list above, there are projects that are witnessing a decline in their market cap for quite some time now.

Therefore, it is critical for traders to study a stablecoin’s governance model, use cases, liquidity, trading volume, and security, before making an investment.