In a world where cryptocurrency is becoming more and more popular, it’s no surprise that there are now several different types of coins to choose from. While Bitcoin remains the most well-known form of cryptocurrency, there are other options that might be more suitable for your needs. One such option is stable coins. In this blog post, we will explore the top stable coins to invest in India. We will also provide an overview of how stable coins work and their benefits.

What is a stable coin?

Stablecoins are cryptocurrencies whose value is linked to a stable asset such as gold or fiat currency such as the US dollar. The various stablecoin categories are determined by the assets that back them up. Because they are backed by other assets, the value of stablecoins is less susceptible to price fluctuations, hence the name.

They provide quick processing, security, and privacy of cryptocurrencies such as Bitcoin and Ethereum during transactions. Furthermore, they have stable prices and are less volatile than other cryptocurrencies, making them a win-win situation for investors.

What Is the Purpose of Stablecoin?

Stablecoins seek to provide an alternative to the high volatility of popular cryptocurrencies such as Bitcoin (BTC), which can render cryptocurrency unsuitable for everyday transactions.

How do Stable coins affect cryptocurrency prices?

Cryptocurrencies are not associated with any government or organisation. They are also unconstrained by political, social, or economic indicators. These currencies, which are entirely dependent on market supply and demand, can thus be quite volatile.

This volatility is both a cause and a result of the public’s (institutional or individual) lack of trust in cryptocurrency as a dependable and balanced currency option. Poor and ambiguous regulation also contributes to this mistrust. People are concerned about the lack of a structured framework to guide crypto adoption, so they see it as a speculative investment.

Regrettably, 1% of the world’s population now controls half of the world’s wealth. In the world of cryptocurrencies, the situation is similar: 448 people own 20% of all Bitcoins. These individuals, known as Whales, actively influence cryptocurrency prices. If these individuals want to convert their crypto assets into Stablecoins, the price of cryptocurrencies falls, or vice versa. As a result, the price of cryptocurrencies is heavily reliant on whales, and thus on Stablecoins.

How do Stable coins work?

A cryptocurrency with a fixed value is known as a stablecoin. This means that the cryptocurrency’s value should not fluctuate as much as it does in other crypto assets. Although this fixed price range is frequently linked to the US dollar, there are currencies that are tied to different price indices. Some Stablecoins, which are just entering the market, intend to be tied to the consumer price index or similar indices of various countries. Because Stablecoins can theoretically be fixed to almost anything, there are Stablecoins that are fixed to multiple fiat coins and even precious metals such as gold or silver.

The key factor for Stablecoins is how the latch is maintained and the foundation of the entire system. In other words, how does the coin organiser keep the currency’s value stable?

Some central Stablecoins, such as Tether, necessitate the use of a custodian to regulate the currency and reserve a certain amount of collateral. Tether keeps the US dollar in a bank account, and the amount held must be equal to what they issue to keep the system running smoothly. Price fluctuations are avoided in this manner.

However, other stable decentralised cryptocurrencies, such as Dai, achieve this goal without the need for a central authority figure. To manage the collateral and keep order, they use smart contracts on the Ethereum blockchain.

Types of stable coins

Fiat-collateralized Stablecoins: These stablecoins are backed by a fiat currency, such as the Euro, British Pound, or US Dollar.

Commodity Collateralised Stablecoins: Commodity-backed stablecoins are backed by tangible assets such as precious metals, oil, and real estate.

Crypto-collateralized Stablecoins: Crypto-collateralized stablecoins are backed by other cryptocurrencies. Because the reserve cryptocurrency is potentially volatile, such stablecoins are over-collateralized, which means the value of the cryptocurrency held in reserves exceeds the value of the stablecoins produced.

Algorithmic Stablecoins: In essence, algorithmic stablecoins could provide market supply and demand-based stability. It should also be noted that algorithmic stablecoins have the highest level of decentralisation and independence.

Top Stable coins to buy in 2022

Some of the top stable coins to invest in 2022 are

• Tether
• USD Coin (USDC)
• Binance USD (BUSD)
• PAX Gold (PAXG)

Tether

Investors buy stablecoins to protect and stabilise their assets during a crypto market downturn. The USDT coin is easily exchangeable for other currencies. It is built on Bitcoin’s public ledger, so it is always available to use and you will never have to worry about its value fluctuating.

Tether Ltd, based in Hong Kong, first introduced USDT in 2017. Tether intends to use blockchain technology to create a digital currency with no volatility as an alternative to fiat currency. USDT primarily balances another cryptocurrency through pair exchanging to maintain stability.

USD Coin (USDC)

The USD Coin is entirely backed by assets denominated in US dollars (USDC). Because one USDC coin is worth the same as one US dollar, USDC is a tokenized version of the dollar. USDC, as a stablecoin, is intended to have a constant value. Like USDT, the majority of USDC supporters are traders looking to avoid excessive volatility.

USD Coin benefits from weak fiat markets as a result of the dollar’s value. Many consumers will choose USDC as a stable pair to protect themselves from losses. As a result, the coin will survive the crypto winter.

Binance USD (BUSD)

Paxos and Binance created the BUSD stablecoin in order to create a cryptocurrency that is pegged to the US dollar. A key feature of BUSD is that one unit of BUSD equals one US dollar. To support this value, Paxos owns an amount of US dollars equal to the entire supply of BUSD. As a result, changes in the price of USD have an immediate impact on the price of the stablecoin. BUSD provides a monthly audited report of reserves in accordance with strict regulatory criteria to ensure the protection and safety of user assets.

PAX Gold (PAXG)

PAX Gold (PAXG), an ERC-20 stablecoin backed by physical gold reserves, is held by the Paxos Trust Company. Each PAX Gold token is worth one troy ounce of a 400-ounce London Good Delivery gold bar in secure gold vaults like Brink’s. PAXG’s value is directly correlated with the current market price of actual gold because it represents it.

PAXG is overseen and approved by the New York State Department of Financial Services. A third-party auditing firm conducts monthly audits to confirm that Paxos’ gold reserve matches the supply of PAXG tokens, ensuring that Paxos’ reserves are maintained. These attestation reports are available on the Paxos website. PAXG’s developers inspect smart contracts for potential flaws on a regular basis.

The bottom line

Each of these stable coins have their own advantages and disadvantages, so it’s important to do your own research before investing in any of them. However, overall, they are all good options for those looking for a stable coin to invest in India.

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