Updated: Jun 14
Ever heard of the term stablecoin, but don't exaclty know what it means? This article explains what makes them so special and how you can earn an attractive interest rate.
Stablecoins simply explained
As the name suggests, these are stable cryptocurrencies. The crypto market is subject to extreme price fluctuations. Perfect for day traders and investors. But for those of us who are looking for a long-term and sustainable investment in crypto, there is a great alternative: stablecoins.
Stablecoins are cryptocurrencies that are linked to a specific asset outside the blockchain. For example, they can be tied to FIAT currencies like US dollars or precious metals like gold. As a result, the volatility of stablecoins is usually significantly lower than that of regular cryptocurrencies.
The aim of stablecoins is to absorb the price fluctuations and thereby offer investors a financial instrument to preserve value on the blockchain and accordingly facilitate payment transactions and trading with cryptocurrencies.
Important: The capital invested in stablecoins remains on the blockchain and is therefore available in your wallet. As a result, this form of digital currency combines the best of both worlds: Transactions continue to take place quickly and directly between buyer and seller, without an intermediary - in other words, decentralised. And in return, the stability of the traditional financial market guarantees the preservation of value.
To enable this, the coins are often backed by other assets traded on the capital market. The USDC stablecoin, for example, is backed by the US dollar. Which means that for one USDC, assets are actually held in dollars at a financial institution. There are monthly checks to ensure that the targeted ratio can be guaranteed.
However: If, for example, the USD vs. CHF exchange rate falls, as it has in recent months, your investment in a stablecoin linked to the USD will also become less valuable. In times of extreme exchange rate fluctuations, an investment in precious metals is possibly more attractive or more stable.
Regulation of stablecoins
The previously lax regulatory environment of stablecoins made them a popular investment opportunity, making them one of the most traded assets in the crypto space. After the collapse of TerraUSD in May 2022, governments and authorities are seeking stronger regulation to protect investors.
Switzerland is one of the first countries ever to offer a clear regulatory framework through the Swiss Financial Market Supervisory Authority (FINMA). The EU, the UK and the US have also been working intensively on the matter. The US Treasury Department has published a report in which stablecoins are assessed as a "faster, more efficient and cheaper payment option" with appropriate regulation. Just last week (19 April 2023), the Finance Committee of the US House of Representatives also discussed a new bill for stablecoin regulation in the United States. The draft aims to clearly regulate the issuing of stablecoins as well as the trading of the dollar tokens.
The goal is to ensure investor and consumer protection, financial stability and the fight against money laundering. As you can see, something is definitely changing.
Invest in Stablecoins and earn up to 8% interest
Stablecoins can be purchased through any crypto exchange or crypto platform. To do this, you need to deposit FIAT currency into your crypto account and then convert it into your chosen Stablecoin.
Examples of stablecoins
Here you can find a list of some stablecoins:
Market Cap (24.4.23)
Attention: Not all stablecoins are fully linked to commodities or FIAT currencies. It is therefore important to check this carefully before buying. The stablecoins selected by Cointract offer a guarantee of full backing and are externally verified.
You can invest in Stablecoins with our product "Earning" in just four clicks. Download the Cointract app and start investing in Stablecoins. In return, you will receive up to 8% p.a. interest - depending on the coin - credited daily by the exchange Nexo.
How does it work again with the high interest rates? A volume of between USD 8 and 20 billion is traded daily on the Nexo trading platform. In order for the exchange to be able to secure its daily business depending on the demand of individual cryptocurrencies, you lend the exchange your coins for a certain period of time. In return, you receive compensation in the form of an interest rate.
Do you want to explore the unbelievable potential with no obligation? On our app you will find an "earning calculator" with which you can check how high your projected interest could be.
Here is an example calculation:
If you deposit CHF 1,000 once and let the money work for you for five years, the projected interest, depending on market conditions, is around CHF 460.
If, however, you additionally transfer CHF 100 to your earning account each month, in five years you will have a projected interest rate of about CHF 1,719.
Just try it out.
This article is for informational / promotional purposes.