Altcoins and Stablecoins are two common types of cryptocurrencies on the market. However, they are distinctly different in how they operate as well as possible fluctuations in their prices. You should understand the differences between the two so that you can make the right investment decisions. Let’s look at each of them and where you can use them best.
What are Altcoins?
An altcoin is an alternative to Bitcoin. It is essentially any other coin that is not Bitcoin. These coins make up a significant portion of the cryptocurrency market, as they are designed to compete with the market leader, Bitcoin. They have the same functionality as the market leader and can be traded at any major crypto exchange.
Each of these coins has one improvement or more over Bitcoin. This could be faster transaction terms, distributed applications, smear contracts, or improvements in privacy systems. Unfortunately, these coins are highly volatile and this may affect their value in the long run. Some of the popular altcoins include Litecoin (LTC), Ether (ETH), Ripple (XRP), Solana (SOL), and Polygon (MATIC).
What are Stablecoins?
As the name suggests, stablecoins are a type of altcoin that is made to maintain a steady value. These coins are pegged to the US dollar or relatively stable fiat currencies. These coins are ideal for anyone who may want to use cryptocurrency but does not want to deal with the resulting price volatility that is witnessed with other altcoins.
Stablecoins do not have wild value swings. They are common for buying and selling goods and services due to their low volatility. You can use them in all places where altcoins are available and used. Some popular stablecoins in the market include Terra USD (USDT), Binance USD, USD Coin (USDC), and MakerDAO’s DAI stablecoin.
You will find that many merchants and online platforms, such as casinos and gaming websites, have a few of each of these coins. This means that apart from the value differences, there is little difference in how they work. Gamers can check out the newest online casino in New Zealand that offers such coins and explore crypto gaming. Everyone else can check if their favorite shop accepts one or more of these coins.
What are the Key Differences between the Two Types of Cryptocurrency?
The main difference between the two is volatility. As explained earlier, stablecoins provide a hedge against this volatility. Apart from pegging the value on a stable currency like the dollar, they also have a fixed amount of cash as a reserve to maintain the price. This means that they are less likely to go down even if the base currency experiences extreme volatility.
Altcoins beat stable coins in providing additional capabilities. Many of these novel features enable decentralised finance products to run smoothly. They also help lower the costs of transactions, enabling these coins to be used for general exchange for goods and services. These coins also take up a sizeable portion of the market, which would provide massive returns to people who make investments early in life.
Stablecoins have a much lower ROI. However, they make up for this with higher interest rates that can range from 5% to over 20%. When this is combined with the convenience of using them and novel design improvements to crypto tokens, they attract many users.
When Do You Hold Either Coin?
The advantage of each coin predisposes it to specific use cases. Investors love to have a bit of both worlds. However, they may pick more of either coin depending on their objects, use, and risk tolerance. The market conditions also make some coins better than others.
When to Hold Altcoins
Altcoins are attractive if you are an investor who looks for the following features:
Make Affordable Investments
Bitcoin and Ethereum are prohibitively expensive. Therefore, most people cannot invest in them. However, there are several other cryptocurrencies with a smaller market cap that cost a lot less. Many investors can try these as a start.
Lucrative Returns
Altcoins have potentially high returns. Those who invest in rising or new assets may make quick gains. Those in the market for quick gains should look at altcoins to meet their goals.
Short-term Investments
Altcoins are good for people who would like to make short-term investments. Their high price volatility means that you can make quick returns within a short period. However, you need to check the likely price movement before putting your cash into any coin.
When to Hold Stablecoins
Stablecoins are ideal if you are in one of the following situations:
Trading
Stablecoins are a good way to move out of cryptocurrencies without converting to fiat money. Many exchanges give users the option to hold stable coins and maintain the value of their investments when major cryptocurrencies face a price swing. Investors can then lock these stable coins into a protocol to earn high yields.
Leverage
Margin protocols like dYdX give crypto investors a chance to use stablecoins as collateral and manage margin trades with leverage of up to 5x. This way, traders can take long or short positions straight from their wallets.
Do your research before holding any of these coins so that you do not lose value due to issues or price volatility. Check out analyses of possible value changes and make informed investment decisions.
