Should You Invest In Bitcoin Or Stablecoins?
Barries for entry into the world of cryptocurrency are lowering each month. A wide variety of exchanges give investors more opportunities than ever to buy, sell, and trade cryptos. Hot and cold wallet options provide various levels of protection for coins, depending on the individual desires of the holder.
Many crypto-related news websites and analysts offer updates and speculation on prices, along with educational resources designed to appeal to new investors.
One common crypto-related question for new and seasoned investors alike surrounds the benefits and primary differences between Bitcoin and stablecoins. Bitcoin remains the most well-known virtual currency and is easily the most valuable coin.
Stablecoins like Palladium Coin are a relatively new arrival onto the digital currency scene but have made big waves. They are pegged to an asset like fiat currency or even to precious metals.
Their stability makes them an enticing option for those interested in investing in digital currency but who are wary of weathering large price swings. SInce stablecoins are tied to a particular asset, they always have a ‘floor price’ while still maintaining the potential for growth if the underlying asset proves to be popular.
But what is the better option for investment? A cryptocurrency like Bitcoin? Or a stablecoin tied to a real-world asset and has a built-in price floor.
Keep reading to understand more about Bitcoin and the different types of stablecoins available for investors to diversify their portfolios with.
The Different Classifications Of Stablecoins
Stablecoins come in a few different categories. Commodity backed coins are underpinned by bullion or assets like real estate. Fiat backed options like Tether are the most common type of stablecoin.
These are recognizable due to their large trade volumes, but some are skeptical fiat-backed coins are actually backed by proper reserves. Crypto backed stablecoins are usually overcollateralized to mitigate volatility.
A fourth category, Seigniorage style stablecoins, are a unique asset where the coin is backed by an algorithm or process. The concept emerged with cryptographer Robert Sams, who argues for a Federal Reserve Coin. The idea for the stablecoin category is to create digital assets that are backed by smart contracts in an autonomous manner.
Precious MetalBacked Stablecoins: Offering The Ability To Buy, Sell, And Trade Bullion
Most people know about the value of precious metals like gold, siver, platinum, and palladium, but fewer understand the lucrative nature of precious metal-backed stablecoins. These forms of stablecoins give investors the best of both worlds by fostering digital asset investment in conjunction with bullion.
Precious metals have long been desired for their stability, beauty, and status as a medium of exchange for centuries. Some metals, like palladium (discovered in 1803) are rarer than silver and gold and is exclusively found in just a few places across the world.
These types of rarer metals are often inaccessible for the average investor due to the high spot price of bullion.
Instead, precious metal-backed stablecoins allow people to purchase coins with any amount of money backed by physical bullion, opening up investment opportunities for a wider range of people.
For example, Palladium Coin represents 1/1000 of an ounce of 99.9% pure palladium. Investors can just provide an Ethereum wallet address to receive crypto after purchase and do not have to provide any other personal information. Coin holders can redeem at anytime for physical palladium.
Bitcoin vs. Stablecoins, What Is The Best Option?
Deciding between Bitcoin and stablecoins comes down to personal preference. Buyers who are interested in reaping big gains and are comfortable stomaching big price swings and losses should opt for Bitcoin.
The popular cryptocurrency still has a large degree of growth potential and dominates the cryptocurrency world. Investors with a more cautious approach should opt for stablecoins. Their built-in price floor (the value of the underlying asset) prevents massive losses while still potentially opening up the coin for profit if it enjoys high trade volume.