Stablecoins

The first stablecoins were issued in 2014 in an attempt to combat the volatility associated with cryptos like Bitcoin. Today, the market capitalisation of these new digital currencies stands above £6.5 billion with Tether’s USDT leading the pack. Here we review stablecoins, with definitions explained and the respective merits and drawbacks detailed. We also explain how retail investors can start trading stablecoins.

Crypto Brokers

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Found 67 Brokers
Reliable and affordable trading since 2009. Join over 900,000 others trading on 400+ CFD products over assets like forex, gold, indices, cryptocurrency and shares from 0.0 spreads through TradingView, MT4 or MT5. Vantage is ASIC regulated and client funds are segregated. Open an account in under 5 minutes.
Demo Account
Yes
Regulated By
ASIC, FCA, CIMA
MT4 Integration
Yes
Min. Deposit
$200
Min. Trade
0.01 Lots
Crypto
Yes
Trading in the Uphold environment offers a one-stop-shop for all your crypto requirements.
Demo Account
Yes
Regulated By
FCA, FinCEN
MT4 Integration
No
Min. Deposit
$0
Min. Trade
$1
Crypto
Yes
NordFX offer forex trading with specific accounts for each type of investor. Spreads start from 0.0 pips while minimum deposits start at $10.
Demo Account
Yes
Regulated By
VFSC
MT4 Integration
Yes
Min. Deposit
$10
Min. Trade
$1
Crypto
Yes
Trade Forex on 0.0 pip spreads with the world's leading True Raw forex broker - IC Markets.
Demo Account
Yes
Regulated By
ASIC, CySec, FSA
MT4 Integration
Yes
Min. Deposit
$200
Min. Trade
0.01 Lots
Crypto
Yes
Skilling are an exciting new brand, regulated in Europe and beyond, with a bespoke browser based platform, allowing seamless low cost trading across devices.
Demo Account
Yes
Regulated By
CySec, FSA
MT4 Integration
Yes
Min. Deposit
100 £/€/$ or 1000 NOK, SEK
Min. Trade
0.01 Lots or 1 Share
Crypto
Yes
Coinmama is a popular cryptocurrency trading exchange, aimed at beginners and high-net worth investors.
Demo Account
No
Regulated By
FinCEN, FINTRAC
MT4 Integration
No
Min. Deposit
$30
Min. Trade
$30 to buy, $100 to sell
Crypto
Yes
BitMEX offer the largest market liquidity of any cryptocurrency exchange. The platform also offers ultra low trading costs and minimum deposit requirements.
Demo Account
Yes
Regulated By
Licensed in the Republic of Seychelles, company number 148707
MT4 Integration
No
Min. Deposit
0.001 BTC
Min. Trade
Varies upon the crypto traded and amount of leverage
Crypto
Yes
PrimeXBT is a Bitcoin-based platform offering highly leveraged trading in FX, indices, commodities, & cryptocurrencies.
Demo Account
No
Regulated By
MT4 Integration
No
Min. Deposit
0.001 BTC
Min. Trade
0.01 contract
Crypto
Yes
Finq.com offer a great all round service with trading on 2100+ assets and immediate bonus offers. Up to $4000 in Deposit Bonuses.
Demo Account
Yes
Regulated By
FSA
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
RaceOption is a binary options and CFD platform offering trading contests and prize giveaways.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$250
Min. Trade
$1
Crypto
Yes
TMGM is a competitive forex and CFD broker with a wide range of instruments, features and tools provided at low-cost.
Demo Account
Yes
Regulated By
ASIC, FMA, VFSC
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
Kucoin is a global crypto exchange offering spot and margin trading alongside lending services and trading bots.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.0001
Crypto
Yes
Rockfort Markets is a New Zealand broker with a competitive range of assets, trading platforms and educational services.
Demo Account
Yes
Regulated By
FSP, FMA
MT4 Integration
Yes
Min. Deposit
$200
Min. Trade
0.01 lots
Crypto
Yes
Pocket Option is a global binary options broker with sleek proprietary trading platform and competitive range of assets.
Demo Account
Yes
Regulated By
IFMRRC
MT4 Integration
No
Min. Deposit
$50
Min. Trade
$1
Crypto
Yes
Pacific Union is a multi-asset broker offering trading via the MT4 and MT5 platforms.
Demo Account
Yes
Regulated By
Cyprus Securities and Exchange Commission (CySEC) and Seychelles Financial Services Authority (SFSA)
MT4 Integration
Yes
Min. Deposit
$50
Min. Trade
0.01 lots
Crypto
Yes
Nexo is a crypto platform with a range of blockchain-based solutions, including trading, lending, borrowing, and payment cards.
Demo Account
Yes
Regulated By
ASIC, FCEN
MT4 Integration
No
Min. Deposit
$10
Min. Trade
$30
Crypto
Yes
Pionex is a cryptocurrency exchange with impressive automated trading tools and bots.
Demo Account
No
Regulated By
FinCEN
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.1 USDT
Crypto
Yes
AdroFX is a regulated, global broker offering forex, CFD and crypto trading with MT4 access and attractive welcome bonuses.
Demo Account
Yes
Regulated By
FSA, BSSLA
MT4 Integration
Yes
Min. Deposit
$25
Min. Trade
0.01 lot
Crypto
Yes
Bybit is an established crypto exchange aimed at active online traders.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.001
Crypto
Yes
OKX is a digital exchange offering trading on hundreds of cryptos across desktop and mobile applications with low fees.
Demo Account
Yes
Regulated By
VARA
MT4 Integration
No
Min. Deposit
10 USDT
Min. Trade
Variable
Crypto
Yes
Bitfinex is among the best crypto exchanges for experienced investors with a free mobile trading application and low fees.
Demo Account
Yes
Regulated By
MT4 Integration
Yes
Min. Deposit
$10,000
Min. Trade
$10 - $25
Crypto
Yes
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
Demo Account
Yes
Regulated By
SEC, FCA, IIROC, SFC
MT4 Integration
No
Min. Deposit
$10000
Min. Trade
$100
Crypto
Yes
Gemini is a leading crypto trading exchange with low fees and a long list of altcoins.
Demo Account
No
Regulated By
FCA
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.00001 BTC
Crypto
Yes
Paxful is a crypto trading exchange and digital wallet offering low fees and easy sign-up.
Demo Account
No
Regulated By
MT4 Integration
No
Min. Deposit
From 0.005 BTC
Min. Trade
10 USD
Crypto
Yes
Kraken is a top-rated cryptocurrency trading exchange offering the largest tokens and altcoins by market cap.
Demo Account
Yes
Regulated By
FCA, FinCEN, FINTRAC, AUSTRAC, FSA
MT4 Integration
No
Min. Deposit
$10
Min. Trade
Varies upon the crypto traded
Crypto
Yes
TP Global FX offers a long list of popular financial assets with spreads from 0.1 pips. With a focus on innovation and transparency, they are a growing brand.
Demo Account
Yes
Regulated By
SVG FSA, NFA, CAMA Nigeria
MT4 Integration
Yes
Min. Deposit
$200
Min. Trade
0.01 lots
Crypto
Yes
Global Prime is a multi-regulated trading broker offering 100+ markets.
Demo Account
Yes
Regulated By
ASIC, VFSC, FSA
MT4 Integration
Yes
Min. Deposit
AUD $200
Min. Trade
0.01 lots
Crypto
Yes
Trade.com offers thousands of tradable assets on desktop and mobile platforms.
Demo Account
Yes
Regulated By
FCA, CySEC, FSCA
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
Quotex offers a proprietary web platform that offers digital options and copy trading.
Demo Account
Yes
Regulated By
IFMRRC
MT4 Integration
No
Min. Deposit
$10
Min. Trade
$1
Crypto
Yes
Just2Trade offer high tech trading on stocks and options with some of the lowest prices in the industry.
Demo Account
Yes
Regulated By
CySEC, NFA, FINRA, Bank of Russia
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01
Crypto
Yes
Videforex accepts deposits in a range of cryptos and fiat currencies. Payouts reach 95% per trade.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$250
Min. Trade
$1
Crypto
Yes
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
Demo Account
Yes
Regulated By
HCMC
MT4 Integration
Yes
Min. Deposit
Broker choice dependent but balance on ZuluTrade should exceed $100
Min. Trade
$1
Crypto
Yes
ActivTrades offers online trading on the MT4, MT5 and ActivTrader platforms. Over 93.60% of orders are executed at the requested price.
Demo Account
Yes
Regulated By
FCA, SCB
MT4 Integration
Yes
Min. Deposit
$500
Min. Trade
0.01 lots
Crypto
Yes
StormGain provides an online crypto trading platform, cloud mining tool, plus digital currency wallets and daily signals.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$50
Min. Trade
$10
Crypto
Yes
LQDFX offers online trading with multiple STP accounts and MT4 analysis tools.
Demo Account
Yes
Regulated By
MT4 Integration
Yes
Min. Deposit
$20
Min. Trade
0.01 lots
Crypto
Yes
RoboForex is a multi-asset online broker offering powerful trading aides.
Demo Account
Yes
Regulated By
IFSC
MT4 Integration
Yes
Min. Deposit
$10
Min. Trade
0.01 lots
Crypto
Yes
SimpleFX is a CFD broker offering its own SFX WebTrader platform & low fees.
Demo Account
Yes
Regulated By
MT4 Integration
Yes
Min. Deposit
$0
Min. Trade
0.01 lots
Crypto
Yes
EagleFX is a popular trading broker offering forex, stocks, cryptos & commodities.
Demo Account
Yes
Regulated By
MT4 Integration
Yes
Min. Deposit
$10
Min. Trade
0.01 lots
Crypto
Yes
Speculate on traditional and emerging financial markets via MT4, MT5 and cTrader. FXPrimus is multi-regulated and offers leverage up to 1:1000 alongside monthly promotions.
Demo Account
Yes
Regulated By
CYSEC, MIFID, ICF, FCA, BaFin, VFSC
MT4 Integration
Yes
Min. Deposit
$15
Min. Trade
0.01 lots
Crypto
Yes
FXChoice is an offshore retail broker offering MT4 and MT5 platform downloads plus online CFD trading.
Demo Account
Yes
Regulated By
FSC
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
EZ Invest is a CySEC-licensed broker offering trading on the financial markets.
Demo Account
Yes
Regulated By
CySEC
MT4 Integration
Yes
Min. Deposit
$500
Min. Trade
0.01 lots
Crypto
Yes
FXCC is a trustworthy trading broker regulated by the CySEC. The brokerage offers ECN trade executions, leverage up to 1:500 and $0 commissions.
Demo Account
Yes
Regulated By
CySEC
MT4 Integration
Yes
Min. Deposit
$0
Min. Trade
0.01 lots
Crypto
Yes
Fortrade is a multi-asset broker offering a simple live account with advanced tools.
Demo Account
Yes
Regulated By
FCA, ASIC, CySEC, NBRB, IIROC
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
FP Markets is a multi-asset broker offering a choice of trading platforms.
Demo Account
Yes
Regulated By
ASIC, CySEC, ESMA
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
AGEA is a regulated forex & CFD broker offering multiple trading platforms and account types.
Demo Account
Yes
Regulated By
Commission for Capital Markets
MT4 Integration
Yes
Min. Deposit
$1
Min. Trade
0.01 lots
Crypto
Yes
Admiral Markets is leading Forex and CFD broker offering the MT4 & MT5 platforms
Demo Account
Yes
Regulated By
FCA, CySEC, ASIC, JSC
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
Spectre.ai is a blockchain-based binary options broker
Demo Account
Yes
Regulated By
St. Vincent and the Grenadines
MT4 Integration
No
Min. Deposit
$0
Min. Trade
$1
Crypto
Yes
Trade on the financial markets with low cost, leveraged products at HYCM.
Demo Account
Yes
Regulated By
FCA, DFSA, CIMA, CySEC
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
FXOpen is a highly regulated FX & CFD broker offering multiple trading platforms.
Demo Account
Yes
Regulated By
FCA, ASIC
MT4 Integration
Yes
Min. Deposit
$300
Min. Trade
0.01 lots
Crypto
Yes
Hantec Markets is a multi-regulated online FX broker offering MT4 and a tailored service providing flexibility to suit any trader.
Demo Account
Yes
Regulated By
FCA, ASIC, FSC, FMA, FSA, CGSE, VSFC, JSC
MT4 Integration
Yes
Min. Deposit
$10
Min. Trade
0.01 lots
Crypto
Yes
Dukascopy is a Swiss-based forex, CFD, and binary options broker
Demo Account
Yes
Regulated By
FINMA, FCMC, JFSA
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 lots
Crypto
Yes
NinjaTrader offer investors futures and forex trading. Use auto-trade algorithmic strategies and configure your own platform while trading with the lowest costs.
Demo Account
Yes
Regulated By
NFA, CFTC
MT4 Integration
No
Min. Deposit
$50
Min. Trade
Varies by asset
Crypto
Yes
GO Markets is an ASIC-regulated FX & CFD broker.
Demo Account
Yes
Regulated By
ASIC, CySEC, FSC of Mauritius
MT4 Integration
Yes
Min. Deposit
$200
Min. Trade
0.01 lots
Crypto
Yes
ThinkMarkets is a multi-regulated forex and CFD broker
Demo Account
Yes
Regulated By
FCA, ASIC, FSCA, CySEC, JFSA, FSA Seychelles
MT4 Integration
Yes
Min. Deposit
$0
Min. Trade
0.01 lots
Crypto
Yes
LegacyFX is a multi-asset broker offering an MT5 download & free signals.
Demo Account
Yes
Regulated By
CySEC, FCA, VFSC, NBRB
MT4 Integration
No
Min. Deposit
$500
Min. Trade
0.01 lots
Crypto
Yes
easyMarkets.com - Simply Honest. Trade CFDs on Forex, Commodities, Indices, Shares & Cryptos With a Top Rated Forex Broker
Demo Account
Yes
Regulated By
CySec, ASIC, BVI
MT4 Integration
Yes
Min. Deposit
€100
Min. Trade
Varies by asset
Crypto
Yes
Deposit and trade with a Bitcoin funded account. BinaryCent offers binary options, FX and CFD trading. 1:100 leverage is also available.
Demo Account
Yes
Regulated By
VFSC
MT4 Integration
No
Min. Deposit
$250
Min. Trade
$.10
Crypto
Yes
Spreadex offer spread betting on financials with low fees. The company is a popular and award winning UK regulated broker.
Demo Account
No
Regulated By
FCA
MT4 Integration
No
Min. Deposit
£0
Min. Trade
£0.01
Crypto
Yes
Pepperstone offers spread betting and CFD trading to both retail and professional traders. Clients can trade FX, indices, commodities and shares on MT4, MT5 and cTrader platforms.
Demo Account
Yes
Regulated By
FCA, ASIC, DFSA, CMA, BaFin
MT4 Integration
Yes
Min. Deposit
$500 recommended
Min. Trade
0.01 Lots
Crypto
Yes
Axi is a global online FX and CFD trading company, trusted by 60,000+ ambitious customers in 100+ countries around the world.
Demo Account
Yes
Regulated By
FCA, ASIC, DFSA, FMA
MT4 Integration
Yes
Min. Deposit
0 $/€/£
Min. Trade
0.01 Lots
Crypto
Yes
Coinbase is the easiest place to buy, sell, and manage your cryptocurrency portfolio.
Demo Account
No
Regulated By
CBoI
MT4 Integration
No
Min. Deposit
0 $/€/£
Min. Trade
0.0001 XBT
Crypto
Yes
Fusion Markets are delivering low cost forex and CFD trading via low spreads and trading costs. Their message is - Stop paying too much to trade
Demo Account
Yes
Regulated By
ASIC
MT4 Integration
Yes
Min. Deposit
$0
Min. Trade
0.01 Lots
Crypto
Yes
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Demo Account
Yes
Regulated By
FCA, CySEC
MT4 Integration
No
Min. Deposit
$200 ($50 in US, $10 in UK)
Min. Trade
$1
Crypto
Yes
An investor with a Plus500 account can trade CFDs on underlying financial instruments such as Forex, Stocks, Commodities, Cryptocurrency (Availability subject to regulation), Options and Indices. With tight spreads and no commission, they are a leading global brand.
Demo Account
Yes
Regulated By
FCA, MAS, CySec, ASIC, FSA
MT4 Integration
No
Min. Deposit
$100
Min. Trade
Varies by asset
Crypto
Yes
Alpari offer forex, CFD and binary options trading across a big range of markets with low spreads and a range of account types that deliver for every level of trader from beginner to professional.
Demo Account
Yes
Regulated By
FSC of Maritius, SEBI, JFSA
MT4 Integration
Yes
Min. Deposit
From $/£/€ 5
Min. Trade
0.01 Lots
Crypto
Yes
Trading 212 Offer a truly mobile trading experience. With tight spreads and a huge range of markets, they offer a dynamic and detailed trading environment. Recent customer care issues have severely damaged the reputation of the brand.
Demo Account
Yes
Regulated By
FCA
MT4 Integration
No
Min. Deposit
€/£/$1
Min. Trade
0.01 Lots
Crypto
Yes
Multi-Award winning broker. Specialising in Forex but also offering stocks and tight spreads on CFDs and Spread betting across a huge range of markets.
Demo Account
Yes
Regulated By
CySec, DFSA, FCA, SCB, FSCA
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
0.01 Lots
Crypto
Yes

What Is A Stablecoin?

Stablecoins are digital currencies pegged to assets with low levels of volatility, such as fiat money like GBP, commodities like gold, or other cryptos like Ripple (XRP). They are essentially a hybrid coin that balances the benefits of cryptos, such as secure money transfer and blockchain technology, with the price stability associated with precious metals, for example.

How Do Stablecoins Work?

There are several types of stablecoins, those pegged to established assets and those that aren’t, known as seigniorage-style. Stablecoins pegged to an asset like gold and are subject to the same price movements, market risks, and regulatory requirements. The purpose of a seigniorage-style mechanism is to use algorithms to control the supply of a coin much like the World Bank printing and destroying money.

Stablecoins explained

Currency-Backed Stablecoins

Fiat-backed stablecoins are tied to a currency, such as the GBP. A third party will hold a reserve of the currency and peg it to crypto, with the stability and value aligned to the cost of maintaining the currency reserve, including any legal requirements such as compliance audits. Stablecoins can be pegged to one currency or multiple, with the US Dollar, Euro, Yen and Yuan the most common. The ratio of the stablecoin vs traditional currency is fixed and reflects the market supply of the crypto.

Currency-backed stablecoins are the most popular type with leading assets including Tether (USDT), USD Coin (USDC), and Gemini Dollar (GUSD). But whilst USDT is the largest by market share, the Bitfinex exchange who facilitated trading in the asset came under public scrutiny after being unable to provide audits for their reserves.

Commodity-Backed Stablecoins

Commodity-backed stablecoins are tied to physical assets such as energy and precious metals, with gold the most frequently used. Because a digital currency is pegged to the value of the commodity, its price may fall if demand for silver drops, for example. Stablecoins are redeemable at the conversion rate to take possession of the asset and can be pegged to more than one commodity.

Crypto-Backed Stablecoins

Crypto-backed stablecoins use smart contracts via blockchain technology while currency-backed stablecoins are validated off the blockchain. Since cryptocurrencies have a history of volatility, if there is a sudden price crash the smart contract may be liquidated. As a result, it’s worth paying off the debt on the smart contract in the event the value of the crypto drops.

Currency-based stablecoins

There are limited regulations or monetary policy requirements to adhere to with cryptocurrency-backed stablecoins which are often stored on decentralised exchange indexes. Organisations typically over-collateralise and store more of the pegged digital currency to protect against market fluctuations. However, this can be easier to audit as a company’s collateral balance can be checked on the blockchain.

Seigniorage-Style

Non-backed stablecoins do not use a reserve but operate like central banks by increasing or decreasing the supply of a coin to maintain price stability. This is achieved by using algorithms and smart contracts which manage the supply ratio. If the price of the stablecoin surpasses the value of the fiat currency it tracks; more tradable coins will be released driving down the price. The opposite will take place should the price of the stablecoin fall.

Best Stablecoins In 2022

Topping the list of the best 5 stablecoins in 2022 is:

  1. Tether (USDT) – The best-known stablecoin is pegged to gold, fiat currency and cash equivalents
  2. True USD (TUSD) – The leading coin is backed by the US Dollar and is among the most liquid options on the market. The company behind the asset, TrustToken, also offers TrueGBP, which is pegged to the Pound Sterling
  3. Paxos Standard (PAX) – The stablecoin seeks 1:1 parity with the US Dollar
  4. USD Coin (USDC) – Backed by crypto heavyweight Coinbase, the world’s largest Bitcoin broker has released its own popular stablecoin
  5. Binance USD (BUSD) – Another of the top 10 crypto exchanges, Binance’s stablecoin is pegged to the US Dollar at a 1:1 ratio

How To Start Trading Stablecoins

Choose An Exchange

Stablecoins are available to trade on key cryptocurrency exchanges, with examples including Coinbase, Binance, Exodus, Kraken and, Crypto.com. Each exchange provides a list of tradable coins and any fees for UK traders. We recommend opting for a provider with good user reviews and a decent range of assets compared with rankings.

Open An Account

Once traders have decided on an exchange they will need to open a live trading account. Some crypto exchanges permit signing up without KYC documentation, however, most will need identity documents to be approved, including Coinbase. This helps to reduce the risks posed by fraud and money laundering.

Deposit Funds

Before you can start buying and selling stablecoins, you will need to deposit funds. This can usually be done via traditional depositing methods such as Mastercard or e-money transfers. Traders can protect their Stablecoin portfolio by investing in a hardware wallet such as those seen on the XRP Ledger, though it’s worth doing your own comparison of providers before investing. Crypto wallets help protect a user’s private keys (transaction data codes) from hackers.

Research

Stablecoins are becoming an increasingly popular investment vehicle leading to a growth in the volume of information available online. Popular research articles include ‘Stablecoins: A Brave New World’, ‘Stablecoins: The Quest for a Low- Volatility Cryptocurrency’, and ‘Stablecoins: Use Cases and, Stablecoins for Dummies.’ Prospective investors can also make use of online lists that publish data on popular assets, including CoinMarketCap.

How to start trading stablecoins

Pros Of Stablecoins

Reasons to start buying and selling stablecoins include:

  • Crypto technology – Retains the secure nature of cryptocurrencies by executing transactions on the blockchain
  • Online information – Traders can educate themselves with the wealth of free online articles and reports
  • Hybrid asset class – A medium of exchange that bridges the gap between fiat currency and altcoins
  • Earn interest – Interest rates on stablecoins are typically greater than high-yield savings accounts
  • Less volatile – Stablecoins offer a safer alternative to day trading erratic cryptos like Bitcoin

Cons Of Stablecoins

There are also some drawbacks to buying, lending and selling stablecoins:

  • Unclear tax policies – Charges and taxes may apply when trading stablecoins
  • Complex setup – The novel nature and differences of this emerging crypto class may deter investors new to altcoins
  • Centralisation – The central influence of fiat or commodity-backed stablecoins arguably contradicts the decentralised nature of cryptocurrencies
  • Profit potential – The stable nature of these coins means reduced price swings and trading volumes which may limit the profit a day trader could generate, for example. Instead, investing in stablecoins is likely a longer-term game
  • Transparency – As highlighted by the Tether lawsuit, some companies issuing and selling stablecoins may be untrustworthy. This lack of transparency can affect the value of coins and impact investor confidence
  • Global market regulation – The world, including the UK, is still grappling to introduce rules and regulations to monitor the use of cryptocurrencies. Aside from differing rules, it’s difficult to predict what the future holds for cryptos and stablecoin stock which makes it challenging to forecast their future value. Keep an eye on news announcements from the likes of Rishi Sunak, Chancellor of the Exchequer, who has been involved in potential crypto risks and regulations.

Final Word On Stablecoins

Despite some challenges, trading stablecoins is on the rise. They are emerging as a prominent class of cryptocurrencies that aim to bring stability to a hugely volatile marketplace while retaining the flexibility and underlying technology behind altcoins. Several exchanges offer the best stablecoins in 2022, with Coinbase topping our list of recommended brokers.

FAQ

How Do Stablecoins Work?

A stablecoin is a crypto whose market value is tied to an external asset. These assets can be a currency (fiat), commodity (gold), or another digital currency (Bitcoin). The most common stablecoins are USD-backed coins. A reserve of the asset is held by the issuing company.

Are Stablecoins Safe?

Stablecoins retain the same level of security as other cryptos by using blockchain technology but are more stable because they’re tied to a robust reserve asset like gold. The reserve is held by a third party meaning some stablecoins retain an element of decentralisation.

Are Stablecoins Taxable?

The tax treatment of stablecoins and cryptos varies from country to country. In the UK, for example, gains from crypto trading are usually subject to capital gains tax. It could be worth seeking professional tax guidance before you start buying and staking stablecoins.

Are Stablecoins Decentralized?

It is debatable as to what extent stablecoins are decentralized. It can be argued that because the digital currencies are pegged to assets controlled by central banks and governments, such as fiat currency, they are not decentralised. With that said, they can still sit on a decentralised blockchain ledger. As a result, it’s more accurate to say they retain some decentralised qualities but are less so than pure cryptos like Bitcoin (BTC), Stellar (XLM), or Ethereum (ETH).

Are Stablecoins A Good Investment?

Stablecoins are less risky than traditional cryptocurrencies. They may be a good investment for the more cautious individual but less so for a day trader. Other cryptos such as Bitcoin experience up to 10% daily price swings which may be more appealing to active traders.