Stablecoins Vs. Altcoins: How Are They Different?
Many cryptocurrency experts and reputable global businesses often compare stablecoins vs. altcoins, trying to find the best coin for investment. The key distinction between them is that stablecoins are stable and not prone to jump in price, while altcoins are subject to volatility and can experience a sharp rise or fall in value. Please keep reading the article to get to know the characteristics of the reviewed digital currencies.
Are Altcoin and Stablecoin the Same?
No, they are not the same. This question is always asked when comparing stablecoin vs. altcoin. Stablecoins are types of altcoins. Their value is hooked to fiat currencies or valuable metals. All further cryptocurrencies after Bitcoin are called altcoins – that is, all digital coins alternative to BTC.
What Is Stablecoin?
A stablecoin is the general name for cryptocurrencies with exchange rates connected to fiat currencies like the dollar or commodities like securities, silver, oil, or gold. A stablecoin is typically tied to a fiat currency at a 1:1 ratio.
Currently, all cryptocurrencies are characterized by high volatility. Therefore, a stablecoin hooked to a conventional type of currency must be stable, unlike other digital currencies. The main features of stablecoins are:
Plenty of stablecoins is available in the cryptocurrency market. Among the most popular stablecoins, we should distinguish the following:
What Is Altcoin?
An altcoin is a general name for any cryptocurrency launched after Bitcoin. There are hundreds of altcoin varieties. They serve as improved alternatives to BTC. Altcoins offer competitive advantages and try to improve the problem areas of Bitcoin.
The main types of altcoins are utility tokens, stablecoins, security tokens, and mining-based cryptocurrencies. As stablecoins have been described above, let us briefly describe other types of altcoins:
Stablecoins vs. Altcoins: The Differences
Both types of cryptocurrencies are used globally. However, they differ from each other in some aspects. Please find the differences between altcoins and stablecoins below:
What Are the Similarities?
Alongside this, altcoins and stablecoins have some similarly advantageous features, even though there are not many of them. The common similarities are the following:
Altcoin vs. Stablecoin: Which One Is Better for Investments?
Investors who often compare stablecoins vs. altcoins try to figure out which one is better to invest in. As a result of unstable cryptocurrency value, market participants have started to actively invest in stablecoins, mainly backed by the US dollar.
Compared with stablecoins, altcoins provide fewer investment options and worse liquidity. Therefore, the prices of altcoins are more volatile.
Moreover, many altcoins have already gone bankrupt and destroyed investors’ funds. That is why it became difficult to make investment decisions on altcoins.
Stablecoins are widely used for trading. The enormous popularity of stablecoins is caused by the fact that they provide investors with a great option to get high returns. Market participants use stablecoins as leverage to speculate on other assets. Thus, they can earn between 12% and 19% on fully secured loans. For many participants, investing in stablecoins is a more attractive option regarding market volatility than buying unstable altcoins.
Well-established altcoins, such as Ethereum or Litecoin, are considered good for long-term investments. According to the overall market capitalization, ETH is the most prospective altcoin for holding.
Overall, potential investors have an option to select from a wide assortment of altcoins and stablecoins to invest in. Each specific case of investing in cryptocurrencies should be carefully analyzed by studying the history of its market capitalization over the past two years. Therefore, it is high time to debunk a common myth that investing in cryptocurrencies is a useless idea.
Now you know the vital differences between altcoins vs. stablecoins and their similarities. You can successfully invest in any offered currencies for both holding and trading. An investor should also assess and realize all possible risks before investing in digital currencies.
Frequently Asked Questions
Are Altcoin and Stablecoin the Same?
No, they are not. A stablecoin is a type of altcoin. Any cryptocurrency launched after Bitcoin is called an altcoin.
Stablecoins vs. Altcoins: What Are the Differences?
The principal stablecoins vs. altcoins difference is that stablecoins are not subject to value changes. Altcoins are prone to volatility and can experience a sharp rise or fall in value.
What Are the Similarities between Altcoin and Stablecoin?
The key similarities between altcoins and stablecoins are fast transactions, anonymity, decentralization, and the absence of intermediaries.