For those of us who enjoy high-risk, high-reward investments, cryptocurrencies are the way to go. It’s common to see coins shoot up 10-fold within a short period of time. It’s also not uncommon to witness that same coin plummet 95%. So what options do you have if you want to put your money in crypto but would rather not worry about seeing a huge drop in your wealth. This is where stablecoins come into the picture. They are called “stable” for a good reason: they are pegged to the dollar, commodity, or even another cryptocurrency in a way that avoids dramatic price fluctuations. Which stablecoins are regarded as the best? We’ve got the scoop!
1. Tether (USDT)
As stablecoins are concerned, the fiat-based Tether has set the standard. The first of its kind, Tether was released in 2014 as Realcoin. It is pegged to the dollar, which means it can always be swapped for dollars at equal value. Today its market cap stands at nearly $80 billion, making it the largest by far. It isn’t to say things have been smooth sailing. For instance, in early 2021 its parent company, Tether Operations Ltd., settled with the New York State Attorney General’s office after being accused of lacking transparency. However, a subsequent audit by the firm Moore Cayman determined that the company had all its ducks in order. Tether price manipulation is unlikely, making it a low-risk stablecoin.
2. Dai (DAI)
Developed by MakerDAO, Dai is backed by Etherium crypto, and since each Etherium corn is worth substantially more than a dollar, MakerDAO has some flexibility when pegging its stablecoin to the dollar. When venture capital firm Andreesen Horowitz learned more about the potential of Dai, it invested $15 million into the crypto project, roughly 6% of all Dai tokens that were in existence at the time. Although the volatility of this stablecoin is higher when compared to Tether, it is nonetheless regarded as low risk.
3. Binance USD (BUSD)
There are a whole lot of reasons to feel confident about owning Binance USD. Importantly, its market cap of $14 billion is the third highest amongst stable coins. But beyond that, the New York State Department of Financial Services has verified that it meets all of the highest standards. First, Paxo Trust Co. — Binance’s partner in its stablecoin project — has enough reserves to vouch for every token. Furthermore, the company has engaged in full transparency, allowing regulators to watch over the reserves that back this coin. These reserves are FDIC-insured and are separate from Paxo’s assets, which means if the company ever declares bankruptcy, investors of the coin won’t see their money seized. For all these reasons, Binance USD is very low risk.
4. TrueUSD (TUSD)
What sets TrueUSD from the pack is that it was the first stablecoin to be fully regulated, with the crypto auditing firm Cohen & Company doing the honors. As a result, there is virtually no risk of investors becoming victims of fraudulent schemes. On the other hand, this degree of regulation means the coin is not fully decentralized, a feature that many people find most appealing about cryptocurrency. Nevertheless, this stablecoin with a $1.3 billion market cap is one that can be trusted.
5. USD Coin (USDC)
This stablecoin project is a collaboration between Coinbase — the leading crypto exchange platform — Bitcoin mining company Bitmain Technologies Inc. Also pegged to the dollar, USD Coin has a market cap of $42 billion, making it the second-largest stable coin on the market. Although accounting firm Grant Thornton LLP has been put in charge of ensuring that reserves exist, USD Coin does not undergo an auditing process, which means internal inconsistencies go unchecked. That said, it is still regarded as a low-risk crypto.
6. Terra USD (UST)
Terra USD is stabilized by Terra’s own stablecoin of the same name. What makes this project unique is that it seeks to remain stable in terms of price while generating growth. It does this by rewarding investors with a small profit whenever they purchase Terra USD above or below $1, which keeps the price at equilibrium. Although it is regarded as slightly riskier than others on this list, it is still rated as low risk.
7. Digix Gold Token (DGX)
Digix Gold Token is quite different from the rest in that rather than being pegged to the dollar, it’s tied directly to the price of gold. In fact, one token is always equal to the price of one gram of the shiny, flaky stuff. As a result, the price of this stablecoin is decidedly less stable, since the price of gold can be volatile. Because of this, the coin is rated as medium-risk. But for investors who feel more comfortable about putting their money into a tangible asset, this is a good option.