Bitcoin made waves in the financial world as its value surged across 2017 to nearly $20,000. As the cryptocurrency doubled in price three years later, many saw the cryptocurrency as one of the most lucrative investments out on the market. Cryptocurrencies like Bitcoin can be bought in seconds with little transaction fees and can be securely stored on digital devices no larger than a thumb drive.
However, some are wary of the big price swings seen with cryptocurrencies like Bitcoin and opt for digital assets with less volatility. Stablecoins, with a reserve asset as a basis, offer stability as they do not fluctuate in price like other crypto assets. Stablecoin can be purchased on a wide variety of platforms like Goldexchange.com.
Both Bitcoin and stablecoins are strong assets. All digital currencies continue to rise in popularity and present themselves as attractive investment options. But which digital option is the better investment? Does one have an advantage over the other?
Keep reading to understand if stablecoins are a better investment than Bitcoin.
Perspectives Depend On The Longevity Of Fiat
Many who own stablecoins choose to hold them for specific reasons. The crypto asset is not a good investment for people interested in making large sums of money, as the price of fiat currencies remain static. While stablecoins backed by precious metals and other commodities are possible investment options, fiat-backed coins still enjoy the largest market percentage.
While currencies like the U.S. Dollar and Euro appear stable, their value does often tend to decline over time. Economic stimulus efforts to ‘print money’ weakens the perception of fiat currencies in some who then see the asset as a depreciating investment.
For example, one U.S. Dollar in 2018 was only able to purchase the equivalent of six cents a century ago. Those skeptical of fiat money (and the centralization of fiat-backed stablecoins) argue Bitcoin would be a better investment as the crypto is decentralized and not linked to the fiat financial system in any way.
Investment Risk Appetites Also Play A Role
While stablecoins remain relatively static in price, it is very unlikely that the cryptocurrency will trade at a higher price than the base asset unless the coin enjoys heavy trade volume and attention. However, a stablecoin could trade at a lower price point than its reserve asset due to a lack of trust or lack of use.
Overall, those who invest in stablecoins have a small chance of making money on their investment but a greater chance of not profiting or even losing money in the wrong scenario (especially with more obscure stablecoins).
Investors who choose Bitcoin have an entirely different world. The cryptocurrency is known for wild price swings that can take place in a matter of moments. The coin surged up in price during 2017 and did the same in 2020 as the coronavirus pandemic led many to seek alternative investments.
Since Bitcoin has no reserve asset, its price could theoretically drop down to zero and become worthless. At the same time, the coin’s price potential is limitless, especially since Bitcoin remains the most popular and well-known crypto coin in and outside the financial world.
Stablecoins are a better choice for investors eager to maintain their portfolios and avoid as much risk as possible. Bitcoin remains the best investment option for people willing to take a risk to potentially make large amounts of money and grow their portfolios.
Stablecoins vs. Bitcoin?
Both stablecoins and Bitcoin remain strong investment opportunities. Digital currencies continue to grow in popularity as more investors and businesses see their value. Diversifying a portfolio with any virtual currency introduces people to the potential and real-world applicability of cryptocurrencies.
Bitcoin’s perception as an on-ramp into the virtual currency world helps the coin maintain strong value and prominence. The rise of decentralized finance has breathed new life into the stablecoin world as the asset is commonly used to transact and function as a bridge between the traditional and cryptocurrency economies.
The question if stablecoins are a better investment than Bitcoin comes down to personal preference. Stablecoins are a better choice for those who believe in DeFi and are interested in avoiding violent price fluctuations (and the potential to lose money).
However, Bitcoin’s immense potential makes the coin a better choice for investors looking for more risk (and the possibility of high rewards). Investors need to make personal decisions about the aggressiveness of their strategies and weigh the pros and cons of each asset before making an investment decision.