Published April 23, 20226 min read

Stablecoins Vs. Altcoins: How Are They Different?

CoinMooner Team

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.

Features

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:

Security. Any investor can use virtual wallets to store stablecoins securely with the help of a private key. Only the holder can access the funds.

Anonymity. Any financial institution cannot track stablecoins ownership to individuals or businesses. Thus, stablecoins provide the complete anonymity and privacy of financial transactions.

Decentralization. No government authority can control the stablecoins flow. All owners of stablecoins ensure the spreading of transaction data over the network.

Exchangeability. Owing to the newest services and tools, holders of stablecoins can quickly exchange their coins for fiat currencies or valuable metals. It can be done via virtual wallets.

Popular Examples

Plenty of stablecoins is available in the cryptocurrency market. Among the most popular stablecoins, we should distinguish the following:

Tether (USDT). Experts consider Tether the most popular stablecoin owing to the highest market cap. Currently, it is almost $80 billion. It operates on the ETH and BTC blockchains.

USD Coin (USDC). This type of stablecoin was launched in 2018. It is also hooked to the US dollar. Currently, Visa allows using the USD coin for all financial transactions within its network. The current market cap is more than $3.2 billion.

Binance USD (BUSD). It is another popular example of a stablecoin backed by dollars at a ratio of 1:1. It was launched in 2019 and can be used for transactions/payments in DeFi. Its current market cap is almost $18 billion.

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.

Types

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:

Security tokens. These altcoins are related to business. They are traded within an initial coin offering. Security tokens provide payouts or ownership shares in a business. There are subtypes of security tokens, such as equity, debt, or profit-sharing.

Utility tokens. This altcoin type provides services and can be sold as part of an ICO. Filecoin is a great example of a utility token offered in an ICO. When a company issues utility tokens, it creates a digital coupon that can be used in the future to get special access to its products/services or receive discounts.

Mining-based cryptocurrencies. New coins are generated by solving compound cryptographic tasks to create new blockchains. They are more similar to Bitcoin than other altcoins. Most of the top altcoins are in this category. Ethereum is the most famous mining-based altcoin as of February 2022.

Popular Examples

Ethereum. It is the most popular altcoin type. ETH is the first altcoin traded on the exchange and one of the most promising cryptocurrencies and Bitcoin. It is the key platform for creating decentralized apps and smart contracts. The Ethereum market capitalization has already exceeded $375 billion.

Cardano. This altcoin was launched in 2015. It supports decentralized finance and smart contracts. Investors use it for trading, lending, asset management, insurance, etc. The current market cap is almost $36.5 billion.

Monero. It is a popular altcoin type founded on the CryptoNote protocol. It was launched in 2014. When comparing stablecoins vs. altcoins, businesses often choose Monero for increased transaction privacy. The current Monero market cap is close to $3.1 billion.

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:

Buying options. Like altcoins, a potential holder can buy stablecoins on any cryptocurrency exchange that supports the required coins.

Anonymity and high transaction speed. All financial transactions made with stablecoins and altcoins are almost instant and entirely private. Neither a sender nor a recipient can be traced.

No intermediaries. Both altcoins and stablecoins can be conveniently used in cross-border transactions without intermediaries like banks or payment systems.

Decentralized finance. Holders of both coin types have complete control over their funds without the participation of governments and banks.

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.

For Trading

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.

Holding

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.

Conclusion

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.