Best stablecoins: how to invest in them?

In this article, we will discuss the best stablecoins in the cryptocurrency market, their reliability, and their ranking based on various factors important to investors. We'll also cover how to invest in stablecoins and explore the unique benefits they offer compared to traditional fiat currencies.

best stablecoins

There are two primary methods to buy stable cryptocurrencies: centralised exchanges and decentralised exchanges. Let's distinguish between these two approaches.

Buy stablecoins on centralised exchanges

The most common and simplest way to buy cryptocurrencies is through centralised exchanges.

Centralised exchanges operate similarly to traditional brokers, with a team of humans managing their operations. They make decisions to ensure the platform's functionality and efficiency. Unlike decentralised exchanges, centralised exchanges do not store cryptocurrencies in self-managed liquidity pools or operate through smart contracts. Instead, they use technologies and methods akin to traditional banking institutions.

To purchase stablecoins on centralised exchanges, you'll follow the same procedures as acquiring other cryptocurrencies. Here's a step-by-step guide using Binance, currently the world's largest cryptocurrency exchange, as an example.

stablecoins uk

First, you need to create an account and provide your card and/or bank details.

In the top bar menu, you'll find the “Buy cryptos” section. Click on it to reveal various purchase options. For example, you can fund your account by initiating a bank transfer from your own bank account or, alternatively, you can buy stablecoins using a credit card. However, If you already own cryptocurrencies on the exchange, you can use them to acquire stablecoins.

Finally, you can also opt for peer-to-peer transactions. However, this is more difficult and even riskier, so it's not always recommended for beginners.

Buying stablecoins with a CEX account

As shown in the image below, choose your preferred payment method and click to continue. Crypto and fiat deposits, buying crypto with a card, or P2P are only the main ways of funding your account, you can also click on “other ways of funding” – such as sending cryptos you already own in a wallet or on another exchange.

If you are looking for immediate funding, you can opt for a fiat deposit via a card. Typically, the bank transfer takes several days to be reflected in your account.

best stablecoins

Then, you need to add the amount of money you want to deposit, the payment method details (such as credit card details), and confirm the transaction.

Alternatively, if you already own crypto on Binance, you can make a purchase directly.

Buying stablecoins with a DEX account

Decentralised exchanges (DEX) operate without a central authority. They are essentially software programs running on a blockchain that enable direct peer-to-peer trading of cryptocurrencies. You don't need to create an account or go through a company. Trades are done directly between users' wallets. Examples include Uniswap, SushiSwap, and PancakeSwap. DEXs offer more privacy and control over your funds, but they can be more complex to use and may have fewer features compared to CEXs.

To buy and sell cryptocurrencies on a decentralised exchange, you need your own custody digital wallet, which involves three things:

  • When using a decentralised exchange, you need a digital wallet that you control. This wallet is secured by a seed phrase, usually comprising 12 or 24 words. This phrase is crucial as it allows you to restore your wallet if you lose access to the device on which it was created. It's vital to keep this seed phrase safe and private.
  • To trade on a DEX, you must already have some cryptocurrency in your digital wallet. You use these funds to trade for stablecoins or other cryptocurrencies. Since DEXs don't hold your money, you can't deposit fiat currency (like dollars or euros) directly; you need to start with some form of cryptocurrency.
  • Every transaction on a blockchain network, including those on DEXs, incurs a fee known as “gas fee.” This fee compensates for the computing energy required to process and validate transactions on the blockchain. You must have some of the blockchain's native cryptocurrency to pay these fees. For example, on the Ethereum network, you need Ether (ETH) to pay gas fees. These fees can vary significantly depending on the network's congestion and the complexity of the transaction.

Next, here is an example of how to acquire stable cryptocurrencies through a decentralised exchange; for this example, we have chosen Uniswap, as it was the pioneering decentralised exchange and, to this day, continues to be the most popular exchange among cryptocurrency investors and traders.

top stablecoins

Once you click on “Launch App”, click on the blue button “Connect wallet” on the right-hand side.

list of stablecoins

The Ethereum network appears by default, but you can use the drop-down menu to choose your desired blockchain. Choose your tokens, the ones you want to use for the payment, and the amounts.

Overall, cryptocurrency trading is not so difficult, even if you are a beginner. Yet, choosing a crypto wallet and learning more about blockchain technology are both important before making any decisions, especially in the UK where access to this market is heavily regulated and there are not many UK brokers and exchanges for investing in cryptocurrencies.

The 5 best stablecoins in the market

Finally, let's wrap up this article by sharing a top best stablecoins 5 list, based on personal opinions, of the best stablecoins available in the market:

#5 PAX Gold (PAXG)

PAX Gold makes it to our list not only because of the reputable company behind it, known as Paxos (which also operates another stable cryptocurrency tied to the U.S. dollar) but also for its unique nature. Unlike most stablecoins that mirror the value of fiat currencies, PAX Gold takes a different route. It replicates the value of a tangible asset, and that asset is none other than gold, a universally recognised store of value.

What's intriguing about PAXG is its full embrace by the cryptocurrency ecosystem and community. This raises the possibility of tokenising other real-world assets, enabling the fractional ownership and custody of these assets at a digital level. For example, the real estate sector has already seen tokenised properties, allowing investors to purchase “shares” of a property by obtaining one or more tokens and securely storing them in their digital wallets.

This trend opens up a world of opportunities, potentially leading to the long-awaited “mass adoption” of blockchain technology and cryptocurrencies, not only for investments but also for fully harnessing the potential of this technology.

If you are interested in investing in precious metals, this is quite an interesting alternative.

#4 Dai (DAI)

Dai, the cryptocurrency created and backed by the MakerDAO organisation, stands as a noteworthy and significant case in the crypto ecosystem. It's widely recognised as a successful stablecoin that isn't solely supported by fiat currency or non-cryptographic assets like bonds.

Instead, Dai is backed by cryptographic assets, and more importantly, it relies on smart contracts rather than individuals or entities for its stability. These smart contracts are public and accessible on the Ethereum blockchain, allowing anyone to verify and review them.

Dai holds a special place in the crypto community because it has demonstrated, at least to date, that it's possible to have a stable digital asset without a direct link to traditional fiat currency. This achievement highlights the potential for stablecoins to maintain their value while breaking away from conventional financial systems.

#3 Binance USD (BUSD)

Moving into the top three best stablecoins, both in terms of quality and market capitalisation, we have Binance USD (BUSD), the stablecoin introduced by Binance and employed within the Binance Smart Chain (BSC).

BUSD stands out as one of the most versatile stablecoins, with a myriad of use cases, spanning across the centralised Binance exchange, the primary decentralised Binance exchange (PancakeSwap), and throughout the DeFi ecosystem of the Binance Smart Chain.

Binance allows investors to lend their liquidity in exchange for earning interest. The interest rate varies based on the duration for which the investor locks their liquidity. Naturally, longer lock-up periods yield higher interest. BUSD is just one of several cryptocurrencies that can be used for this purpose. However, it's worth noting that some other stablecoins and even regular cryptocurrencies are also accepted for lending, often with higher interest rates due to their higher volatility.

Moreover, Binance provides opportunities for users to access launchpads (platforms for cryptocurrency presales) and launchpools (for cryptocurrency airdrops) if they hold certain cryptocurrencies on the exchange. BUSD is a common choice for participating in these investment opportunities.

#2 USD Coin (USDC)

USD Coin, created by Circle and often referred to as the stable cryptocurrency of Coinbase, holds the second spot on our list. While USDC may not have as many use cases as some other cryptocurrencies in this ranking, it distinguishes itself as one of the most secure stablecoins. The assets backing USDC are well-known and transparent, which appeals to many investors seeking a secure place to preserve their liquidity.

#1 USD Tether (USDT)

As of today, USD Tether (USDT) reigns supreme as the leading and best stablecoin. It boasts the widest adoption among all stablecoins, with extensive availability on numerous centralised and decentralised exchanges and across various blockchains. Native USDT transactions can occur without the need for bridges, wrapped tokens, or complex technical solutions. This accessibility makes USDT an attractive choice, especially for newcomers and non-expert cryptocurrency enthusiasts.

USDT also offers a diverse range of use cases beyond its association with Binance and the Binance Smart Chain. You can provide liquidity on many exchanges using USDT and earn interest. Holding USDT grants access to launchpads for cryptocurrency presales and participation in launchpools for airdrops, among other benefits. Undoubtedly, USDT stands as the quintessential stable cryptocurrency and boasts the highest market capitalisation.

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Summary

In conclusion, the cryptocurrency landscape continues to expand, offering numerous options for less volatile stablecoins in the market. The choice ultimately depends on your preferences and investment goals.

FAQs

How do stablecoins maintain their stability?

Stablecoins use various mechanisms to maintain stability. The most common methods include collateralisation (backing the stablecoin with assets held in reserve), algorithmic control (adjusting supply based on demand), and a combination of both.

Are stablecoins backed by real assets?

Many stablecoins are backed by real assets, such as US dollars or other cryptocurrencies. These assets are held in reserve to ensure the stablecoin's value. However, some stablecoins rely on algorithms to maintain their value without direct asset backing.

Are stablecoins safe to use?

Generally, stablecoins are considered safe, especially those backed by reputable organisations and transparently audited. However, risks can vary depending on the stablecoin's backing and the platform or wallet used for storage. It's crucial to choose reliable stablecoins and follow best practices for securing your cryptocurrency assets.

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