Navigating the world of cryptocurrency as a newbie can be daunting. You are confused about the perfect coins to invest your money in. As a beginner in crypto, one of the most vital things you need to know is the difference and correlations between various coins and learning when and how to invest in them.
Also, you should know what you want to use them for. Do you want to use it to place bets on MLB picks today? Or is there any other option on your mind? Once you know that, you can proceed. Fortunately, due to the success and vast acceptance of Bitcoin, several other cryptocurrencies now exist to compete and offer a wide range of varieties for users and lovers of crypto.
This article will explain what stable coins and altcoins are, the key difference, and the pros and cons of these coins.
What are Stable Coins?
Stable coins are cryptocurrencies that have their value tied to another. They are pegged to a real-world currency like the dollar or a valued item like gold. That way, the price of the coins does not fluctuate and is not volatile.
Crypto is known to experience a tremendous increase and frequent dips, which makes it unpredictable, and that is why investors prefer the stability that stable coins offer. The main aim of stablecoins is to keep market value constant regardless of market volatility.
So the favourite thing to do as an investor or a newbie looking to retain your money without the involvement of a third-party intermediary is to exchange your Bitcoin or altcoin for USDT or stable coin. With this, the value of your investment or money remains the same but in a different form.
With stable coins, crypto traders can trade volatile cryptocurrencies with stable cryptocurrencies when they want to lower their risks. For instance, if an investor invests in bitcoin and does not want to risk the price of bitcoin falling against the US dollar, he can exchange the bitcoin for USDT and still maintain the same value.
What are Altcoins?
An altcoin is an abbreviation for “alternative to Bitcoin. Altcoins are coins that are not Bitcoin. Some of the popular altcoins are Ethereum, dogecoin, litecoin, etc. These coins serve the same purpose as bitcoin but with modifications. Ethereum offers a decentralized system allowing users to build a decentralized finance domain.
Altcoins make up a vast part of the cryptocurrency market and are designed to function in the same way as the leading coin; bitcoin.
There are over 3,000 altcoins in the cryptocurrency world, and many more are being minted and developed every day.
It is important to note that stablecoins are forms of altcoins that do not undergo volatility because their value is tethered to outer funds like the US dollar or gold.
Key Differences Between Them
The significant difference between stablecoin and altcoin lies in their functionality. Here are the key differences:
- Altcoins are volatile and constantly met with market spikes and dips, while stablecoins provide stability, making them the go-to when there is a dip in the charts.
- Stablecoins have a fixed amount in cash reserve. Altcoins differentiate themselves by providing decentralized finance (Defi) which comes with a lower fee when compared to Bitcoin.
- Altcoin provides early returns on investment for early investors. Stablecoin has a limited and smaller ROI because, with stablecoin, your money does not increase or decrease in value.
Pros and Cons of Stable Coins
Pros
- A high degree of certainty. Stablecoins do not suffer from the volatility of the market.
- The price of stablecoins is consistent.
- Stablecoins are attached to a more significant source.
Cons
- No room for the price increase.
- Stablecoin is more of an investment rather than a coin.
Pros and Cons of Altcoins
Pros
- It offers traders a choice other than Bitcoin.
- Low transaction fees for traders.
- It offers unique functionality and is accessible to users with limitless resources for developers and enthusiasts.
Cons
- The value is volatile.
- It has a high potential for fraud and hackers.
Our Thoughts
When it comes to investing in any of these coins, it is solely dependent on the investor and what you want to achieve in the long term. Both coins are for different purposes and require different levels of devotion.
Stablecoins are designed to resist the volatility of cryptocurrencies, tying their value to an underlying security. With stablecoin, the value of your investment remains the same, requiring minimal monitoring.
Altcoins are alternatives to Bitcoin, a digital currency with unique rules, making the volatility even higher.
Although, due to the low price of altcoins, it is a good start for a newbie venturing into the world of crypto but not without the need to monitor the market charts in order for you not to get rekt.
Regardless of the coin you choose to invest in, always remember that risks are involved, so do your due diligence before putting your money.