How to Invest in Stablecoins
A stablecoin refers to a cryptocurrency dependent on a stable asset for its value. Stablecoins are usually associated with fiat currencies like the U.S. Dollar, but they can also be linked to precious metals and other cryptocurrencies. Stablecoins can be more stable than other cryptocurrencies and have the potential to be similar to currencies people use daily.
Stablecoins are best used for their primary purpose by active cryptocurrency traders. Fiat-backed cryptocurrencies are an easy and quick way to protect cash that traders and investors would otherwise keep in volatile assets.
People are increasingly using fiat-backed cryptocurrency to send international payments. However, stablecoin payments can be made immediately and at a much lower cost. It is important to remember that transactions using stablecoins are not free. Transaction fees vary depending on the blockchain that the stablecoin is running on. Users of stablecoins will also have to pay fees for converting stablecoins into fiat currencies.
Stablecoin Investing vs. Crypto Investing
Stablecoins provide investors with stability, as they mimic the value of non-volatile assets. Traditional cryptocurrencies such as Bitcoin and Ethereum are another popular choice. Although these assets are more volatile than stablecoins, they can offer greater returns.
Some top stablecoins are USDC, DAI and USDT. Each of the three mentioned coins are pegged to the U.S. dollar and use a different method for maintaining its peg.
USDC is backed with fiat currency kept in reserve by its parent company Circle. MakerDAO holds ETH and other cryptocurrencies in reserve which back DAI. Parent company Tether supports USDT with its portfolio of USD, bonds, and cryptocurrencies. These coins aim to be a stable alternative to other cryptocurrencies, which can be volatile.
Stablecoins hope to create a currency that can be used every day without worrying about price swings. Considering stablecoins hold a market capitalization in the hundreds of billions, they’ve been quite successful so far. There have, however, been concerns about transparency regarding collateral backing these assets, particularly for centralized companies. Dai’s backings are completely transparent and can be viewed on Ethereum’s blockchain.
How Do Stablecoins Make Investors Money?
The simplest way to earn profit on stablecoins is with Origin Dollar (OUSD). OUSD is fully collateralized by USDC, USDT, and DAI. To earn interest on stablecoins, the collateral is placed in DeFi protocols Compound, Curve, Aave, and Convex.
These protocols allow users to earn interest on cryptocurrency holdings. The stablecoins that back OUSD earn interest, and the interest is deposited directly into token holders’ wallets in the form of new OUSD. This way, investors can grow their OUSD holdings directly from their wallets without needing to manage interest rates across DeFi apps.
Stablecoins have the advantage of being tied to fiat currencies and other assets. Their value is more stable than traditional cryptocurrencies. They are ideal for use in protocols such as Aave, Compound, and Curve, allowing users to earn interest while not worrying about volatility.
OUSD is a stablecoin backed by leading stablecoins, making it a reliable and safe investment. OUSD earns users interest by placing collateral in DeFi protocols for them. These investments generate more OUSD directly deposited in the users’ wallets. It is a great way to earn interest in your crypto holdings.
How Safe Is Earning Yield on Stablecoins?
Stablecoins are generally considered to be safe. This is because stablecoins are supported by assets like gold or fiat currency, ensuring stability. They are also often kept safe by reputable financial institutions. Of course, there is always the possibility of something going wrong with any investment. Overall, however, stablecoins are a safe way to grow your wealth.
However, it’s important to look into how stablecoins are backed to ensure they are a safe investment. Some stablecoins have lost their peg, leaving investors with pennies on the dollar. Fully collateralized stablecoins are generally seen as the most safe stablecoins, but some investors opt for only fully decentralized and fully collateralized stablecoins, such as Dai. However, USDT, USDC, OUSD, and DAI are all generally accepted to be safe stablecoins.
Stablecoin Investing With Origin Dollar (OUSD) vs. Centralized Platforms
There are two options for stablecoin investment: decentralized protocols and centralized platforms. Each has its pros and cons. But which one is best for you? You could use a more platform like Coinbase and BlockFi, but this has its own set of risks. The platform allows you to deposit your assets and it manages your assets on your behalf. However, insolvencies have left some investors that use this method without their money.
You don’t have complete control over your assets on centralized platforms. You could lose access to your funds if the platform goes down or becomes insolvent. Decentralized protocols are more transparent than centralized platforms.
Origin Dollar (OUSD) is a stablecoin that utilizes DeFi to earn investors interest. OUSD allows you to keep full custody of your assets at any time, and there are no lockup times. The protocol is transparent and managed by DAO.
Users can vote on how funds are allocated. OUSD allows you to earn interest from your deposited assets. The protocol is built on Ethereum and is always liquid. While being slightly harder to use than centralized platforms, decentralized protocols like OUSD can be an excellent choice for investors who value transparency and risk-management.
