7 Best Stablecoins to Buy Now | Cryptocurrency

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Transparency and regulation are key factors in stablecoins’ fates.

The value of digital assets known as stablecoins is pegged to an external asset, such as gold or fiat currency, leading to their early reputation for reliability. But that stability was called into question when the third-largest stablecoin, TerraUSD (UST), abruptly “de-pegged” from the US dollar in May, eventually plunging to less than a hundred on the dollar and triggering the collapse of its sister token , LUNA. In addition to raising questions about risk transparency, “stablecoins have become a major concern for governments who fear that they will eventually pose serious competition against the sovereignty of their national currencies,” says Will Evans, managing director of the Americas for the crypto exchange CEX .IO. As cryptocurrency investors, including a growing number from emerging markets, dip their toes back into the diverse pool of stablecoins, some naturally may wonder how secure these investments really are. Many experts agree, though, that they are here to stay in some form. Here are seven of the best stablecoins for investors to look at now.

Tether (USDT)

“Stablecoins fill a very important role in the digital asset ecosystem,” says Mauricio Di Bartolomeo, chief strategy officer and co-founder of cryptocurrency lender Ledn. They provide a way for clients to transfer dollar-denominated funds between exchanges, a factor that’s becoming increasingly important for investors in emerging economies looking for access to the stability of the US dollar. Even though its market cap recently dropped below $70 billion, its lowest level since October 2021, Tether is still the largest stablecoin in the world and therefore at the crest of this global expansion. Launched as Realcoin in 2014, Tether’s original purpose was to solve the dual problems of crypto’s high volatility and its lack of convertibility. But over the last 18 months, even Tether has suffered from the fallout of other coins, such as TerraUSD, and volatility in the sector. According to Di Bartolomeo, USDT is also “not as transparent” as another coin on this list, USD Coin, and has lost market share. Regardless, USDT’s market cap is more than triple its December 2020 level.

Transparency and regulation are key factors in stablecoins’ fates.

The value of digital assets known as stablecoins is pegged to an external asset, such as gold or fiat currency, leading to their early reputation for reliability. But that stability was called into question when the third-largest stablecoin, TerraUSD (UST), abruptly “de-pegged” from the US dollar in May, eventually plunging to less than a hundred on the dollar and triggering the collapse of its sister token , LUNA. In addition to raising questions about risk transparency, “stablecoins have become a major concern for governments who fear that they will eventually pose serious competition against the sovereignty of their national currencies,” says Will Evans, managing director of the Americas for the crypto exchange CEX .IO. As cryptocurrency investors, including a growing number from emerging markets, dip their toes back into the diverse pool of stablecoins, some naturally may wonder how secure these investments really are. Many experts agree, though, that they are here to stay in some form. Here are seven of the best stablecoins for investors to look at now.

Tether (USDT)

“Stablecoins fill a very important role in the digital asset ecosystem,” says Mauricio Di Bartolomeo, chief strategy officer and co-founder of cryptocurrency lender Ledn. They provide a way for clients to transfer dollar-denominated funds between exchanges, a factor that’s becoming increasingly important for investors in emerging economies looking for access to the stability of the US dollar. Even though its market cap recently dropped below $70 billion, its lowest level since October 2021, Tether is still the largest stablecoin in the world and therefore at the crest of this global expansion. Launched as Realcoin in 2014, Tether’s original purpose was to solve the dual problems of crypto’s high volatility and its lack of convertibility. But over the last 18 months, even Tether has suffered from the fallout of other coins, such as TerraUSD, and volatility in the sector. According to Di Bartolomeo, USDT is also “not as transparent” as another coin on this list, USD Coin, and has lost market share. Regardless, USDT’s market cap is more than triple its December 2020 level.

USD Coin (USDC)

Di Bartolomeo calls USDC “the best stablecoin in the market right now in terms of integrity and transparency.” That’s because, according to Di Bartolomeo, “USDC has focused squarely on regulation and transparency since day one,” giving credibility to its issuing company, Circle. The parent firm’s stated goal is to bridge traditional finance and blockchain technology, a strategy that appears to be working out well for the company. Di Bartolomeo says the USDC coin is “the only stablecoin that has monthly audited reserves published on their website that any user can view.” And this transparency helps stabilize USDC’s price, which boosts adoption. As rival Tether has lost some market share in recent weeks, USDC has been gaining it. Di Bartolomeo says existing investors and new entrants to the space are “preferring USDC to USDT to the tune of 10 to 1.”

Dai (DAI)

The only decentralized stablecoin available on the market so far is Dai (DAI), meaning that it is algorithmic and isn’t backed by any central authority. DAI is “soft-pegged” to the US dollar; it uses collateralized debt in the form of Ether (ETH), the native cryptocurrency of the Ethereum blockchain. Di Bartolomeo says that “this creates a bit more risk management that has to happen to ensure (sufficient) reserves.” He adds: “The drawback to Dai is that it doesn’t have an exact peg. You can’t really control where the free-floating rate is going to be, which makes it very challenging for institutions to use Dai for lending.” Lending is one of the main advantages stablecoins have over other cryptocurrencies. However, Dai has shown a propensity for staying pegged to the US dollar in situations of high volatility, Di Bartolomeo says.

Binance USD (BUSD)

The biggest problem that dollar-pegged Binance USD could face, according to Di Bartolomeo, is that it’s attached to a particular crypto exchange, Binance. And although Binance has been discussing going public sometime over the next two to three years, the company is still private. That means it is less transparent than a public company would be. Approved by the New York State Department of Financial Services, BUSD is issued in partnership with Paxos Trust Co. LLC, a well-known name in the cryptoverse. Paxos also issues the much smaller Pax Dollar stablecoin. Less than two years into its existence, BUSD is already the world’s third-largest stablecoin by market cap, behind USDT and USDC. It’s picked up popularity as more crypto wallets, platforms and services support the stablecoin, which has a market cap of $17 billion.

Pax Dollar (USDP)

Paxos as a company is “probably second or third on the list after Circle to get its dollars in the good books of regulators,” says Di Bartolomeo. This bodes well for Paxos’ prospects. Launched as Paxos Standard (PAX) in 2018, stablecoin Pax Dollar (USDP) emerged in August 2021. Paxos redubbed the coin to more closely identify its name and ticker with the US dollar. Though USDP is the sixth-largest stablecoin by market cap and also regulated by the New York State Department of Financial Services, it is still lacking size compared with the leading coins. USDP is valued at less than $1 billion, compared with USDT’s $65.9 billion market cap as of July 6.

TrueUSD (TUSD)

TrueUSD is another “reputable operator,” according to Di Bartolomeo. Beyond market cap and liquidity, the reputation of a stablecoin’s operator is one of the most important factors in determining the value of investing in that stablecoin, he says. “If platforms and operators don’t have risk management, it can cause investors a world of pain.” This is likely to become more of a factor as governments attempt to regulate cryptocurrencies. And with the recent bipartisan Responsible Financial Innovation Act put forward by Sens. Kirsten Gillibrand, DN.Y., and Cynthia Lummis, R-Wyo., US regulations appear to be getting closer by the day. TrueUSD, launched by TrustToken to give crypto traders a nonvolatile alternative to Bitcoin (BTC) and free-floating tokens, has made regular auditing a focus since its inception, so it appears prepared for a more regulatory climate.

Digix Gold Token (DGX)

Besides the US dollar, gold has been used to back stablecoins. One of the best current bets for a gold-backed stablecoin is Digix Gold Token (DGX). The location of the issuing company’s gold is an important consideration when looking at such stablecoins, says Di Bartolomeo. For example, an ounce of gold in a vault in St. Louis has a very different value than an ounce of gold stored in Moscow. For its part, DGX keeps its physical gold in vaults in Singapore and Canada. Individual investors must consider whether these are locations where they’re comfortable having the gold assets that back their stablecoins stored. DGX has a diminutive market cap of $800,000 as of July 6, but its price has been on the move in the past week, rising 6%.

7 best stablecoins to buy in the current environment:

Tether (USDT) USD Coin (USDC) Dai (DAI) Binance USD (BUSD) Pax Dollar (USDP) TrueUSD (TUSD) Digix Gold Token (DGX)

Updated on July 7, 2022: This story was published at an earlier date and has been updated with new information.

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