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Stablecoins.. it’s almost a bit of a buzz word lately isn’t it? We see a tonne of companies releasing (or at least trying) to release their own stable coins, the latest being facebook with their alleged ongoing work on “facebook coin”. 

But regardless of the hype around these stablecoins, they do seek to serve a very importance purpose and that’s creating something that’s designed to minimise the effects of price volatility, and with Bitcoin forever throwing tantrums and moving the markets along with it, having a safe haven to hedge into during times of instability could save you…. a lot. 

What Is a “Stablecoin”

Like we mentioned above, stables were created to allowed traders to minimize their risk of percentage losses during time of volatility. They can be pegged to a particular currency (in many cases the US dollar), or even to a commodity like gold or silver. 

However, while they provide a safe haven to traders, some go against the very nature of what makes cryptocurrency so great and that’s centralization. Although not all stablecoins are centralized (like TrueUSD for example), others like MakerDAO or Havven are what’s called “Crypto-Collateralized Stablescoins” and this means they are backed by digital assets on-chain, which are collateralized with other crypto assets like Ethereum for example. 

We then have Non-Collateralized Stablecoins these are a newer type of stablecoin created by Robert Sams in 2014 and uses what’s called “seniorage shares”, which use a smart contract to mimic a central bank that’s entire job is to issue a currency with a value of $1. 

This means the network keeps the price of the coin stable by issuing news coins if the price of the stablecoin is too high, or conversely it burns coins (removes them from circulation) if the price of the coin gets too low. Pretty cool, right? Stablecoins like CarbonUSD and Basis are examples of these Non-Collateralized Stablecoins.

 

The Different Types of Stablecoins

By now you’re probably wondering what are the most popular and used types of stablecoins that you might consider using when the market wants to ruin our down with giant wicks to the downside, or even somewhere you can store you coins when you just aren’t in the mood for trading?

Great, then let’s dive in to some of our favourite stablecoins…

PAXOS STANDARD (PAX)

Total Supply: 111,631,321

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in 2018, Paxos standard is a stable coin that runs on the Ethereum blockchain.
Used as a stable hedge that’s pegged 1 to 1 against USD, this coin ensures its value with the ability to cash out directly with the company Paxos, bypassing exchanges and offering no fees to do so.

Because of this, fluctuations are at a bare minimum and the coin maintains its value aggressively. Regulation comes from the New York State Department of Financial Services and regular third-party audits are conducted by Withum, of whom conduct regular checks of the bank accounts of which the USD is kept.

Monthly Attestation Reports can be found directly on the coins website and the ability to withdraw directly into USD bypassing every other institution puts this Stable coin on top of our list for the best stable hedge in the Cryptocurrency space

USD COIN (USDC)

Total Supply: 236,887,801

USD $ Held: $180,192,792

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in October 2018, USDC is the second Ethereum based stable coin in this wrap-up, USD Coin is the creation of The Circle, a US Based Crypto Financial company and Coinbase, one of the worlds largest Cryptocurrency exchanges based out of San Francisco.

This hedge, like Paxos, has the ability to be cashed out directly to USD via the account services on the USD Coin official website. Having this feature available to clients is going to be the most important factor in ensuring these coins stable prices.

Full transparency is maintained by Grant Thornton LLP, an accounting firm that’s based in New York, fully available and contactable by the public.

Reports can be found on the USDC Website.

TrueUSD (TUSD)

Total Supply: 202,619,765 

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

True USD is a cryptocurrency that was created by the company TrustToken. Their vision is to be able to tokenize regular assets, like Property, Oil, shares and other commodities, which in turn, would create investment opportunities for retailers around the world.

One of the main benefits of TUSD is their use of Escrow accounts. This is the use of a third party that controls the funds in bank accounts. By handling funds this way TrustToken does not have access to the USD at all, ensuring its free from manipulation.

Like some of the other stable coin offerings, each token represents a 1 to 1 certificate, completely redeemable by the user for fiat USD. This can be achieved by getting in contact with TrueUSD.com

MAKER DAI (DAI)

Total Supply: 88,847,849

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in late 2017, DAI works a little differently to all the other stable coins we’ve spoken about so far. DAI does not reply on cash held in Institutional bank accounts for its backing.

DAI works on a collateral system. Instead of depositing USD Fiat into the system, the system accepts Eth as collateral to produce the DAI tokens, so if you deposit 1 ETH then you’ll get the equivalent in DAI.

To then get the ETH back you’ll have to pay back the DAI you withdraw from the system. The only issue with the platform is if the value of ETH goes down below the withdrawn amount, the DAI platform then has to liquidate the ETH collateral to ensure the value of the DAI token that was withdrawn.

This is an extremely unique way to handle the stable coin value problem. There are obviously pros and cons, but a big pro being that it bypasses the institutional bank accounts and legal system, bypasses the risks like frozen accounts or fraudulent withdrawals. But in turn, adds pressure to the ETH price.

GEMINI (GUSD)

Total Supply: 71,213,675

Can be Traded On: Bitfinex

Details Can be Found on: Coinmarketcap

Gemini Dollar was founded by the New York company Gemini Trust Company. The US Dollars for the ETH based token are held in State Street Bank and Trust Company.

Like most of the other stable coins, GUSD allows the user to deposit and withdraw directly with the platform itself, bypassing volatility of exchanges.

Audits are conducted by BPM, a public accounting firm that has many locations across the globe. The monthly reports can be found and downloaded on the Gemini website. GUSD can be found across a variety of different exchanges and the highest volume pairing is against BTC

TETHER (TUSD)

Total Supply: 2,580,057,493

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

The largest and most prevalent stable coin in the CryptoCurrency space is Tether. Often referred to as the bank of Crypto, Tether has been a stable hedge for all traders and investors alike since its launch in 2014.

Tether has been the centre of controversy regarding its asset holdings, Bitcoin price manipulation and its unclear connection with exchange Bitfinex. Until recently, USDT has been trading for under 1 of 1 against its fiat hedge USD.

The reasoning behind the price rise up to 1 for 1, was the recent launch of the Account verification and direct redemption system. Where the user, like others, can directly redeem their USDT tokens for USD Fiat, for a fee. While this system is running, this will ensure a stable hedge against Fiat USD and allow Tether to continue being the mode widely used Stable Coin in the Crypto Industry.

Hang Out With us in Discord... It's Free

Our incredibly supportive community of like-minded traders are all waiting for YOU. Come and Join us today, helping you to take your trading knowledge from where you are now, to where you want to be.

* 2018 Unity Trading Group PTY LTD. The information on this website has been created by Unity Trading Group (ABN: 630163343) for general information and educational purposes only and is not to be constructed as personal or financial advice. All forms of trading carry a high level of risk, and may not be suitable for all investors. Before deciding to trade any market reported on by Unity Trading Group you should carefully consider your objectives, financial situation, needs, and level of experience. By trading, you could sustain a loss in excess of your deposited funds. Before trading ASX/FX/Cryptocurrency markets you should be aware of all the risks associated with trading. Unity Trading Group recommends you seek advice from a separate financial advisor before making any decisions based on the general information given on this website or affiliated platforms.

Stablecoins, What are They?

Like we mentioned above, stables were created to allowed traders to minimize their risk of percentage losses during time of volatility. They can be pegged to a particular currency (in many cases the US dollar), or even to a commodity like gold or silver. 

However, while they provide a safe haven to traders, some go against the very nature of what makes cryptocurrency so great and that’s centralization. Although not all stablecoins are centralized (like TrueUSD for example), others like MakerDAO or Havven are what’s called “Crypto-Collateralized Stablescoins” and this means they are backed by digital assets on-chain, which are collateralized with other crypto assets like Ethereum for example. 

We then have Non-Collateralized Stablecoins these are a newer type of stablecoin created by Robert Sams in 2014 and uses what’s called “seniorage shares”, which use a smart contract to mimic a central bank that’s entire job is to issue a currency with a value of $1. 

This means the network keeps the price of the coin stable by issuing news coins if the price of the stablecoin is too high, or conversely it burns coins (removes them from circulation) if the price of the coin gets too low. Pretty cool, right? Stablecoins like CarbonUSD and Basis are examples of these Non-Collateralized Stablecoins.

 

The Types of Stablecoins

By now you’re probably wondering what are the most popular and used types of stablecoins that you might consider using when the market wants to ruin our down with giant wicks to the downside, or even somewhere you can store you coins when you just aren’t in the mood for trading?

Great, then let’s dive in to some of our favourite stablecoins…

PAXOS STANDARD (PAX)

Total Supply: 111,631,321

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in 2018, Paxos standard is a stable coin that runs on the Ethereum blockchain.
Used as a stable hedge that’s pegged 1 to 1 against USD, this coin ensures its value with the ability to cash out directly with the company Paxos, bypassing exchanges and offering no fees to do so.

Because of this, fluctuations are at a bare minimum and the coin maintains its value aggressively. Regulation comes from the New York State Department of Financial Services and regular third-party audits are conducted by Withum, of whom conduct regular checks of the bank accounts of which the USD is kept.

Monthly Attestation Reports can be found directly on the coins website and the ability to withdraw directly into USD bypassing every other institution puts this Stable coin on top of our list for the best stable hedge in the Cryptocurrency space

USD COIN (USDC)

Total Supply: 236,887,801

USD $ Held: $180,192,792

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in October 2018, USDC is the second Ethereum based stable coin in this wrap-up, USD Coin is the creation of The Circle, a US Based Crypto Financial company and Coinbase, one of the worlds largest Cryptocurrency exchanges based out of San Francisco.

This hedge, like Paxos, has the ability to be cashed out directly to USD via the account services on the USD Coin official website. Having this feature available to clients is going to be the most important factor in ensuring these coins stable prices.

Full transparency is maintained by Grant Thornton LLP, an accounting firm that’s based in New York, fully available and contactable by the public.

Reports can be found on the USDC Website.

TrueUSD (TUSD)

Total Supply: 202,619,765 

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

True USD is a cryptocurrency that was created by the company TrustToken. Their vision is to be able to tokenize regular assets, like Property, Oil, shares and other commodities, which in turn, would create investment opportunities for retailers around the world.

One of the main benefits of TUSD is their use of Escrow accounts. This is the use of a third party that controls the funds in bank accounts. By handling funds this way TrustToken does not have access to the USD at all, ensuring its free from manipulation.

Like some of the other stable coin offerings, each token represents a 1 to 1 certificate, completely redeemable by the user for fiat USD. This can be achieved by getting in contact with TrueUSD.com

MAKER DAI (DAI)

Total Supply: 88,847,849

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

Launched in late 2017, DAI works a little differently to all the other stable coins we’ve spoken about so far. DAI does not reply on cash held in Institutional bank accounts for its backing.

DAI works on a collateral system. Instead of depositing USD Fiat into the system, the system accepts Eth as collateral to produce the DAI tokens, so if you deposit 1 ETH then you’ll get the equivalent in DAI.

To then get the ETH back you’ll have to pay back the DAI you withdraw from the system. The only issue with the platform is if the value of ETH goes down below the withdrawn amount, the DAI platform then has to liquidate the ETH collateral to ensure the value of the DAI token that was withdrawn.

This is an extremely unique way to handle the stable coin value problem. There are obviously pros and cons, but a big pro being that it bypasses the institutional bank accounts and legal system, bypasses the risks like frozen accounts or fraudulent withdrawals. But in turn, adds pressure to the ETH price.

GEMINI (GUSD)

Total Supply: 71,213,675

Can be Traded On: Bitfinex

Details Can be Found on: Coinmarketcap

Gemini Dollar was founded by the New York company Gemini Trust Company. The US Dollars for the ETH based token are held in State Street Bank and Trust Company.

Like most of the other stable coins, GUSD allows the user to deposit and withdraw directly with the platform itself, bypassing volatility of exchanges.

Audits are conducted by BPM, a public accounting firm that has many locations across the globe. The monthly reports can be found and downloaded on the Gemini website. GUSD can be found across a variety of different exchanges and the highest volume pairing is against BTC

TETHER (TUSD)

Total Supply: 2,580,057,493

Can be Traded On: Binance

Details Can be Found on: Coinmarketcap

The largest and most prevalent stable coin in the CryptoCurrency space is Tether. Often referred to as the bank of Crypto, Tether has been a stable hedge for all traders and investors alike since its launch in 2014.

Tether has been the centre of controversy regarding its asset holdings, Bitcoin price manipulation and its unclear connection with exchange Bitfinex. Until recently, USDT has been trading for under 1 of 1 against its fiat hedge USD.

The reasoning behind the price rise up to 1 for 1, was the recent launch of the Account verification and direct redemption system. Where the user, like others, can directly redeem their USDT tokens for USD Fiat, for a fee. While this system is running, this will ensure a stable hedge against Fiat USD and allow Tether to continue being the mode widely used Stable Coin in the Crypto Industry.

Hang Out With us in Discord... It's Free

Our incredibly supportive community of like-minded traders are all waiting for YOU. Come and Join us today, helping you to take your trading knowledge from where you are now, to where you want to be.

* 2018 Unity Trading Group PTY LTD. The information on this website has been created by Unity Trading Group (ABN: 630163343) for general information and educational purposes only and is not to be constructed as personal or financial advice. All forms of trading carry a high level of risk, and may not be suitable for all investors. Before deciding to trade any market reported on by Unity Trading Group you should carefully consider your objectives, financial situation, needs, and level of experience. By trading, you could sustain a loss in excess of your deposited funds. Before trading ASX/FX/Cryptocurrency markets you should be aware of all the risks associated with trading. Unity Trading Group recommends you seek advice from a separate financial advisor before making any decisions based on the general information given on this website or affiliated platforms.

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