The following opinion piece on cryptocurrency is the latest in our series of cryptos. Please be reminded that all cryptocurrencies have risks, and the advice from central banks and financial regulators is that investors should only invest what they can could afford to lose.
Lately, everyone looking to make some investments is coming across the same option – cryptocurrency. Cryptocurrency is, to this day, one of the best performing assets that corporates and individuals could invest in. Also known as digital currencies, these offer you many advantages. If you pick wisely, they can turn you into a millionaire almost overnight.
The rapid development of the digital currency market has prompted many to make their purchases. Naturally, not everyone got the better side of this. Just like any other investment, you can make a good or bad choice when you’re purchasing cryptocurrency. It’s so fiendishly difficult to decide what to invest in now, but with proper research, you can make an informed choice.
Right now, the trending currency is USDC, a promising stable coin.
Did you know that 5 of the 12 largest crypto investments ever were made in 2021?
The industry began trending across the entire globe with the record run by Bitcoin. Ever since, the market has introduced new cryptocurrencies every year, offering new opportunities for making smart investments. One of the most popular opportunities today is stablecoins.
The stablecoin industry reached $40 billion in supply and at the beginning of the year, the monthly transaction volume of these currencies exceeded $200 billion. This makes stablecoins the real story of today. For corporates who are looking to grow through smart investments, this seems to be the wisest choice right now.
Stablecoins are the answer to all in the private sector who seek digital currencies. Right alongside Facebook-backed Diem and PayPal, stablecoins are said to transform financial services and payments. What began as a slight interest in crypto traders and enthusiasts swiftly turned into a preferred option for corporates, financial institutions, and asset managers.
Many link these to Eurodollars, tokens that circulate the digital world and are already redeemable for actual dollars (at least most of them). Since they first appeared in 2014 and 2015, they served as a stabilizer and an option to invest in digital, not physical cash.
Just like Lars Hoffman explains in an interview:
“Stablecoin is nothing other than a digital representation of a fiat dollar, euro, or Japanese yen in digital format’’.
If you’ve decided to make such an investment, USDC is the right way to go.
Why are stablecoins so popular?
The answer to this lies in the economic data. Starting 2020, stablecoins exploded in popularity. Their supply ballooned by over 5 times just last year and leaped from $5 billion to $28 billion.
This was prompted by the DeFi growth in the summer months. Stablecoins proved to be the trend for traders and developers alike. Institutions around the globe are now using this type of currency to make intra- or cross-border payments in a fraction of the time as regular, fiat payments. It’s why Visa decided on their new step – because it’s simple and reliable.
It’s no wonder that they’re rising in popularity. For companies and corporates, this is a safe investment – to transact with currencies like USDC that are tied to the global reserve currencies. Are stablecoins the best cryptocurrencies to invest in now? Well it depends upon your investing objectives as we’ll explain below.
What is USDC and why might investors want to invest?
Less Hoffman made an excellent explanation of USD stablecoins such as USDC. He says:
“You have U.S. dollars that are sitting in a bank, an IOU is issued on the blockchain… and what is important is that in the end you have physical fiat money sitting in a bank, and you have a digital token representing that… You still have real money.”
Today, there are around 50 live stablecoins and 25 corporates which hold these as part of their treasury management practices. The total supply goes above $38 billion. From this number, 99.5% is linked to the USD. The two leading stablecoins at this point are USDC and Tether, holding 70% of the total supply.
Both are very competitive, but many see USDC as a more credible choice. If you find a safe place to make USDC such as the MoonPay platform to make your purchases and invest in this wisely, you can grow significantly in the months that follow.
Compared to Tether, USDC is more credible because it has the dollars in reserve. Tether might have a higher volume of centralized exchanges because of its network effect, but USDC is associated with the United States, making it a safer choice.
Other stablecoins are often used by people outside of US jurisdiction who would like to get a piece of the pie that is the US dollar. USDC, on the other hand, is seeing an acceleration in corporate legitimacy and adoption, especially now after Visa announced its use of this digital currency.
Why is USDC considered safe, you might ask?
This stablecoin is overseen by the Centre consortium. It’s also helmed by the likes of Coinbase and Circle, two major industry players. Its value is almost equal to that of the dollar, which makes it perfect for all kinds of operations including investment, exchange, and trading.
It doesn’t end here. Traders and corporates looking to score some gains and keep them safe can do so by using this cryptocurrency. USDC is backed with currencies like the yen and the dollar, which makes it highly reliable on its own.
And of course, there are transaction fees that are lower compared to other coins. Just like Tether, the USDC comes really close to the USD, which makes fees minimal and calculations simpler.
Investing in USDT is a lot like investing in banks. These companies that operate within the US are regulated as trust institutions, and they use the same methods as banks when verifying the balances. In addition to this, the USDC reserves are audited monthly by Grant Thornton LLP, and everyone can see the results on the Circle website.
Why would you choose USDC over Tether?
Since you’re looking at stablecoins that don’t fluctuate greatly in price, these currencies are expected to attract many new investors. Lately, Tether or USDT has been trending much more than the USD Coin. USDT has more trading volume on a global level and around 4 times the market cap of USDC. Even so, corporations are considering using the latter instead of Tether. Why is this?
There are three main reasons why you might pick the first over the latter:
- The quality of the collateral that is backing Tether is often questioned, and USDC is considered much safer because of this. When it comes to regulation, USDC and its founding companies are very transparent about their actions and numbers and comply with all regulations that come that way. Tether is much less compliant and transparent, and they often dodge the tricky questions.
- Many trusted sites pay out interest on USDC and not on Tether. Starting May the 5th when the numbers came out – over 15 billion USD Coins in circulation, smart corporates and prominent brokers of cryptocurrencies started paying attractive interest rates on USDC held.
- USD Coin is fully backed by cash and USDT is not. Tether has ambiguous proof of funds and its coin is partially backed by liquidity. The rest of it is covered with cash equivalents and other assets, as well as loans made to third parties. Generally speaking, the USD Coin is more transparent and better audited.
- Because of the latest Circle win! According to Forbes, Circle is ‘the new leader in crypto and blockchain’. The creator of USDC recently raised $440 million in private investment from various strategic, institutional, and corporate investors.
Risks to consider
These investments don’t come without risks and every corporate entity should understand them. Not only do you need to choose the currency in which you’ll invest, but you also need to pick wisely when you choose where to invest and store your digital currency.
Some of the risks to keep in mind when you’re purchasing or holding USDC and other stable coins include:
- It can be hard for the public to verify how much of this currency the issuer holds. This might be a serious risk with other options, but the fact that the USDC currency is subjected to monthly audits and backed by high-profile companies reduces the risks significantly.
- The interest rates can diminish with time. As stablecoins grow in popularity, we can expect the interest rates to come down slowly. Even so, compared to other investment options right now, the interest rates will probably be the best option for quite some time.
- The risk of hacks, of course. When you hold digital currency, there’s always the risk of getting hacked in exchange.