Stablecoins have become one of the best options to venture into the crypto markets, without having to deal with the volatility that can be a significant concern for many investors. In addition, stablecoins are a popular choice for lending on platforms such as Blockfi or Yield App. Stablecoins can also work as a reliable medium for transferring money. Since stablecoins don’t usually lose value, investors can earn a conservative 10% per annum lending their tokens.
But did you know that there are four different types of stablecoins? Or, you could buy them using a credit card? Continue reading as we delve into the concept of stablecoins and explore new ways to invest in the tokens in the sections below.
5 Easy Steps on How To Buy Stablecoins with a Credit Cards
When investing in stablecoins, you need to be well aware of the different payment methods that might come in handy when entering a trade. Often, preferred payment methods like traditional banks and e-wallets tend to lag, becoming one of the most determining factors for the success of your trade.
This is where credit cards come into play! One of the swiftest, most convenient, and real-time payment methods increases your chances of buying a stablecoin at the decided entry point by settling the transactions in real-time (up to 30 seconds).
Time needed: 10 minutes.
In this step-by-step how-to guide we will explain the process of how you can buy stablecoins with a credit card on the Binance platform:
- Log into your Binance Account
Once logged into your Binance account, go to the “Buy Crypto” button and then click on the “Credit/Debit Card” payment option.
- Choose your FIAT Currency & Stablecoin
Select your FIAT currency from the list, such as GBP or EUR and Stablecoin you would like to purchase. Then enter the FIAT amount you would like to spend.
- Enter your Card Details & Billing Address
Go to “Add New Card” and enter your credit card details, as well as your billing address and CVV. Select “Add Card”
- Confirm Purchase of Stablecoins
Double-check your payment details are correct and confirm your purchase of stablecoins
- Verify Payment
You will need to verify your payment on your bank’s OTP Transaction Page.
What Are Stablecoins?
Stablecoins are a group of crypto tokens that represent ‘stability’ over the Blockchain network. Their main feature is to induce price stability to the generally volatile and unpegged cryptos like Bitcoin.
This type of crypto token generally mirrors the value of an asset rather than revolving around the market movements. For instance, several stablecoins reflect the U.S Dollars and have a $1 value, keeping them stable and similar to the currency.
Depending on their collateral structures, these tokens are further divided into four types, as explained in the next section.
Advantages of Stablecoins
Regarding the advantages, stablecoins outweigh cryptos in more than one instance. Here’s a detailed view of the different advantages associated with them:
- Stablecoins tend to be less volatile in comparison to other crypto assets.
- Stablecoins are usually backed by fixed assets, making them a secure investment option.
- Third, stablecoins allow seamless global payments without attracting significant transaction fees or cross-border charges.
- The technologies backing these coins can make them a safe option to invest and transact with.
- Finally, stablecoins can be somewhat anonymous and serve as a stable investment in the volatile crypto market.
What Are The Most Popular Stablecoins?
We have put together a list of the 5 most popular stablecoins which are pegged 1:1 (normally) to the US Dollar.
Tether (USDT) is one of the most famous stablecoins, primarily for the asset class it collateralized. A crypto issue by Bitfinex, the USDT primarily covers securities, treasury bills, and cash reserves of a particular amount. Lastly, Tether is minted at a 1:1 ratio, implying that one USDT coin equals one USD, making it a reliable and affordable option to start investing with.
Binance Coin (BUSD)
Another famous coin backed by the USD 1:1 ratio is the Binance Coin or BUSD. Created as a collaboration between Paxos and Binance, the primary role behind developing BUSD is to boost the pace of moving virtual assets via the international financial network. A local stablecoin of the Binance platform, you can also invest in BUSD if you’re an avid trader or want to reap the benefits of trading over Binance.
USD Coin (USDC)
Last we have the USD Coin (USDC), another great stablecoin backed by the U.S. dollar. This stablecoin is widely adopted due to the simple infrastructure that it provides to multiple protocols, exchanges, digital wallets, and other related services. In addition, USDC also favours faster and more convenient transactions.
Interested in buying altcoins with a credit card? Check out on beginner’s guide on how to buy altcoins with a credit card on Binance.
4 Types of Stablecoins
As the name suggests, this type of stablecoin is supported by different identical assets like precious metals, natural reserves, and real estate. Therefore, investors settling for this type of stablecoin generally are the ones to possess tangible assets holding an actual value.
Typically, the commodity-backed stablecoins deliver better returns as their collaterals tend to increase in value over time. However, it should be noted that these coins primarily depend on gold as collateral for these tokens.
Fiat Collateralized Stablecoins:
Fiat-based stablecoins are the most common tokens you’ll find during your research. As the name suggests, they’re collateralized by an individual currency like the Euro, US Dollar, or GBP, with a 1:1 ratio. One stablecoin is equivalent to one unit of the given currency.
One of the best options to start as a beginner, these fiat collateralized stablecoins can be liquidated quickly. Moreover, you could easily swap it for real currency in your bank account as they have a genuine fiat currency supporting it in a bank account.
The other most common stablecoins you might encounter are the algorithmic or non-collateralized ones. These tokens aren’t backed by any asset or collateral and are generally pursued by an algorithm that controls their supply.
Since no collateral is involved in their operations, these tokens tend to supply stability per the supply tenets and market demand. In addition, it should also be noted that these coins stabilize the increased demand by increasing the processing rate, ultimately decreasing the prices. Considering their type, these coins tend to suit risk-taking investors.
Cryptocurrency Backed Stablecoins
Lastly, we have crypto-backed stablecoins. These coins encounter massive fluctuations in their interest rates and stand out as the most volatile stablecoin on the list.
These tokens offer better decentralization over fiat-based stablecoins and match the price variation via over-collateralization. For instance, if you mint $100 worth of crypto-supported stablecoin, Bitcoins worth $50 are reserved separately. In addition, these tokens also offer better liquidity and are tagged as the most intricate stable coin in the market.
Here are some of our articles you may also find helpful;