Since the big controversy surrounding Bitcoin and the subsequent fall in prices, the RBI has taken major steps to curtail cryptocurrencies across the board. A major step that was taken was the complete ban of processing of payments related to cryptocurrencies. This left many cryptocurrency investors in a bit of a quandary. To go around this legal loophole, investors came up with the ingenious idea of investing in cryptocurrencies tied to Fiat or government-issued currencies. The cryptocurrency was known as Stable Coin. With the return of the cryptocurrency, Indian investors are making a strong comeback with the rupee claiming its rightful place.
Over the last few years, investors in India have increasingly adopted cryptocurrencies in its various forms. The country triumphs at being the highest cryptocurrencies remittance market with inward deposits exceeding $125 billion in 2019. With a quickly growing E-commerce industry that is looking to leverage online cryptocurrencies for payments and the general awareness about cryptocurrencies, the potential for investors was always a pressing one. The introduction of Stable Coin has certainly solved a critical piece of the crypto transaction puzzle.
So, what exactly are Stable Coins and how do they work? This article will also help you gain a significant yield in investing in Stable Coin.
What are Stable Coins?
Stable Coins are price stable cryptocurrencies. This means that the market price of a Stable Coin is pegged to another stable asset like the US Dollar. While Bitcoin and Ether are the two dominant cryptocurrencies, their prices are volatile. A simple speculation on a crypto currency can fuel its volatility, which in the long run hinders long run adoption. For all of these reasons, a Stable Coin has long been considered the Holy grail of the cryptocurrency ecosystem. There are primarily three types of Stable Coins:
- Fiat Collateralized coins: Backed by real work currency like US Dollar.
- Crypto Collateralized coins: Backed by other cryptocurrencies like Ethereum.
- Non-Collateralized coins: Don’t have the backing and are dependent on markets.
Impact on Indian Investors
After the ban of cryptocurrency transactions in India, many investors took to Stable Coin as a means to continue trading in cryptocurrencies. Tether emerged as the most popular Stable Coin. The cryptocurrency converted cash into digital currency and is backed by an equivalent amount of traditional fiat currencies, like the dollar and the Euro. Another incentive of Stable Coin was the regular audit conducted on the companies that issue the cryptocurrency. This brought about a greater degree of stability and safety to the investor.
In India, Stable Coin has unique advantages after the RBI ban on payments. As Arjun Vijay, co-founder of Chennai-based Giottus, opines: “In India, use of stable coins skyrocketed after the RBI ban on payments since exchanges could not accept rupees. For our peer-to-peer customers, stable coins offered the solution of holding cash in the exchange without having the need to withdraw to the bank account every time.”
Benefits of Stable Coins
- Easy to Trade
Buying Stable Coins like USDT is super easy. All you need is an internet connection and a mobile device. You will also find a number of platforms like Angel Broking that make it easy to get signed up, create a wallet, and buy Stable Coins in whatever currency you want.
- Easy to Calculate
Most people find investing in cryptocurrencies challenging. Cryptocurrencies are inherently difficult to understand as just how much a particular cryptocurrency is worth is hard to tell
Stable Coins, on the other hand, are pegged to a Fiat currency. A good example is Tether where each cryptocurrency is directly proportional to the US dollar. This makes it easy to calculate to understand from an investor’s point of view.
- Low Volatility
One of the primary benefits of Stable Coin is that they remain largely unaffected by price fluctuations. This makes it a practical alternative as the amount of money invested doesn’t change over time. As the name suggests, Stable Coins are helping cryptocurrency investors get over the initial hurdles faced by traditional cryptocurrencies like Bitcoin and Ethereum.
With the 2020 Supreme Court order to quash the ban on cryptocurrencies, there has been a remarkable rise in Stable Coin. There has also been a significant rise in the Rupee crypto that contributes to about the same volume as Stable Coin. This transition is happening parallelly with the formalizing of the Indian Cryptocurrency market. If you are looking to invest in cryptocurrency, there is perhaps no better time than now.