In a recent announcement, the total market valuation of all Bitcoins in existence crossed the $300 Billion mark! While the cryptocurrency still has a long way to go, it has exceeded the expectations of even the hardened critics.
There is no doubt that Bitcoin and other cryptocurrencies are revolutionary in nature. They question established notions, traditions and practices of our societies. The promise they hold has threatened people who have controlled economies and human lives.
In this article, we are going to address a rather common question, asked by most investors. The question revolves around which is the better investment- Bitcoins or Stablecoins. However, before we begin, let us look at what are Stablecoins.
Stablecoins: Meaning and Definition
In very simple terms, Stablecoins are digital currencies backed by a physical asset. In many instances, Stablecoins can be backed by either the dollar or gold.
Stablecoins emerged as a reaction to combat the volatility of Bitcoins. The wide oscillation in the value of Bitcoin was preventing it from becoming a good and stable source of investment.
Even though people loved all the benefits- decentralization, no regulation, hedge against inflation, Blockchain technology and so on, they did not want the volatility. Stablecoins have been always pegged at the ratio of 1:1. This means for every one dollar; the equivalent is one Stablecoins.
This method of fixing valuation is easy, uncomplicated and does not leave too much room for volatility. However, many critics of fixing the dollar point out, that the dollar itself is speculative in nature and masked behind hidden and improper financial ethics.
No matter the problems and issues behind Stablecoins' usage, their popularity is slowly rising. In fact, according to data, Stablecoins occupy 3% of the entire crypto market in the world.
Can Stablecoins be a good alternative to Bitcoins?
The original idea of Satoshi Nakamoto, as encapsulated by Bitcoins is still much more attractive than Stablecoins. In the past thirteen odd years since its existence, there are numerous Altcoins and Stablecoins, which have tried to upstage Bitcoin.
However, with nearly 70% of all the market share of all the cryptocurrencies in circulation, Bitcoin continues to lead the crypto pack. According to experts, Stablecoins dilute on the logic of cryptocurrencies rather than taking them forward. This is because the value on which it is fixed is itself very problematic.
While governments and financial institutions may think of it as being more stable, the reality is much different. If Stablecoins are backed by the dollar, it will always be subject to the problems of inflation, recession and depression.
Reasons why Bitcoins will always be better than Stablecoins
According to platforms like crypto engine, Bitcoins will always continue to be much more attractive investment opportunities for investors. This is because Bitcoin, like Gold, is a store of value. On the other hand, Stablecoins can never be a store of value as they are subjected to inflation, devaluation and debt issues.
Hence, shat Stablecoins can at best aim for is to be a currency, rather than a store of value. This is why even though people might start using Stablecoins as a currency to make faster payments; they will always prefer Bitcoins as a source of value.
The growth and valuation of Bitcoin continue to soar much faster than that of Stablecoins. This offers investors greater returns at lightning speeds. Imagine if you had bought Bitcoins for around $2500 USD in mid-March, you would be seeing more than four times the growth in end-July. No other asset base has the potential to deliver this kind of growth!
In the next few years, even though Stablecoins will continue to grow. It will not be a match for Bitcoin. Institutional investors are seeking to pull their investments from altcoins and push the same into Bitcoins. Even if governments are going to engage with cryptocurrencies and look to regulate them, it is going to be more likely with Bitcoins than any other form of cryptocurrency.