10 Best Stablecoins to Look Into During Volatile Times (Updated)
Looking for a list of top stablecoins? You're in the right place. From being backed by actual dollars in a bank account to relying on a decentralized protocol, stablecoins exist in various forms. This comprehensive guide to the best stablecoins will explain what stablecoins are, the different types to watch for, and some examples of the top stablecoins in the crypto market.
Key Takeaways:
Stablecoins are cryptocurrencies that have their price pegged to, and are backed by, a singular reserve or group of assets.
Stablecoins are most commonly used as a medium of exchange.
Some of the best stablecoins to look into during volatile times include Tether (USDT), USD Coin (USDC) and First Digital USD (FDUSD).
What Are Stablecoins?
Stablecoins are cryptocurrencies that have their price pegged to, and are backed by, a singular reserve or group of assets. These price stabilization reserves can range from fiat currencies and national currencies to algorithms or commodities.
If you're new to crypto, you might be wondering about the use cases of stablecoins. Their most common form of utility is as a medium of exchange.
Altcoins or even Bitcoin can appear extremely volatile. Their values can wildly fluctuate because of huge inflows and outflows of funds. This can be cumbersome if you're looking to use your crypto as a medium of exchange. Thankfully, with stablecoins, the value of your assets can be preserved as they're meant to maintain their dollar-pegged value. This makes it easy for investors and traders to on-ramp their fiat and convert it into crypto, as the exchange can be made with minimal price volatility.
On top of being a solid medium of exchange, crypto enthusiasts also use stablecoins to participate in decentralized finance (DeFi) projects that involve the lending or staking of stablecoins. Doing this provides investors with passive, low-risk yield as they provide extra liquidity on the platform. This ultimately makes staking or lending stablecoins a viable option for investors during periods of high volatility and/or bearish sentiments.
Now that we've covered the basics of what stablecoins are and their various use cases, let's move on to the different types of stablecoins in the crypto space.
What Are the Different Types of Stablecoins?
Fiat-Backed Stablecoins
Fiat-backed stablecoins are, as the name suggests, pegged to a fiat currency. Fiat currency is essentially not backed by a commodity and is issued by a government. These types of stablecoins typically have a reserve of an equal amount of fiat currency to which they’re pegged. For instance, USD Coin is a top stablecoin that’s largely backed by the U.S. dollar. Fiat-backed stablecoins can be used for transactions, just like other cryptocurrencies, and are considered more reliable.
Crypto-Backed Stablecoins
In essence, these stablecoins are backed by a group of cryptocurrencies. By relying on another cryptocurrency as collateral, the average investor may understandably fear that the crypto-backed stablecoin will be highly volatile. To relieve these worries, such crypto-backed stablecoins are generally overcollateralized to make sure they maintain their value throughout periods of massive price fluctuations.
Algorithmic Stablecoins
Unfortunately, UST's implosion has smeared the reputation of the best algorithmic stablecoins, despite solid examples like FRAX and DAI maintaining solid track records. Also called non-collateralized stablecoins, algorithmic stablecoins do not have standard fiat or commodity collateral. These decentralized coins are made to help boost stability in market prices without connecting a central authority. Algorithms include special stabilization measures, which are hardcoded on Ethereum smart contracts for the stablecoins. To combat periods of volatility, the supply of algorithmic stablecoins is highly responsive to market forces.
On a more technical level, an oracle contract is used to assist these algorithmic smart contracts in execution. These contracts help by retrieving pricing information for algorithmic stablecoins on other exchanges. Following this, the price periodically enters a rebasing contract to determine if supply should increase or decrease. The contract then analyzes the number of tokens to mint or burn from user wallets based on the information gathered.
Some stablecoin teams have gone one step further to make their algorithmic stablecoins partially collateralized. For example, FRAX is partially collateralized by fiat-backed stablecoin USDC and FXS, the Frax protocol's governance token.
Commodity-Backed Stablecoins
Like fiat-backed stablecoins, these stablecoins are backed by external assets that aren’t cryptocurrencies. In this case, commodity-backed stablecoins are pegged to precious metals like gold. While commodities also fluctuate in price, they tend to hold value better in times of economic inflation than other forms of assets.
Commodity-backed stablecoins are useful for investing in assets that aren’t always easy to source in a nearby geographical location. For example, physically buying and storing gold can be expensive and inaccessible in many places. However, by purchasing commodity-backed stablecoins, investors can gain access to a tokenized form of rare metals.
What Are the Best Stablecoins?
In order to determine the best stablecoins, we must first understand what makes a good one. On a fundamental level, the best stablecoins must provide transparency in their holdings. Also, top stablecoins need to have a high trading volume so they can act as a liquid medium of exchange. These two factors combined provide a base on which to build confidence with investors, who can trust the stability of the stablecoin, knowing that it’s backed by a credible reserve of assets and that it can be easily exchanged with other stablecoins.
From USDC to DAI, here are some of the best stablecoins you can consider including as part of your portfolio.
Best Fiat-Backed Stablecoins
1. Tether (USDT)
If you're a crypto veteran, it's no surprise that Tether (USDT) tops our list of stablecoins. Originally known as Realcoin, the Tether stablecoin was officially released in 2014 and was one of the earliest stablecoins. It’s backed by multiple assets that include traditional currency and cash equivalents, ranging from bonds to commercial paper. Tether has faced scrutiny over its reserve transparency, but has since clarified that its reserves are backed 100% by the U.S. dollar, which can be verified via its transparency page.
In July 2024, USDT continued its steady growth, marking an 11th consecutive month of market capitalization increases to reach $114 billion, a 1.6% rise from the previous month. Despite a slower growth rate compared to some competitors, USDT maintains its stronghold in the stablecoin market with nearly 70% of market share, reflecting its pervasive use and trust within the crypto trading community.
Additionally, Tether reported a record $5.2 billion in profits for the first half of 2024, demonstrating its profitability and significant impact on the stablecoin sector amid a challenging regulatory environment in Europe and a broader decline in trading volumes across the market.
USDT remains one of the top stablecoins, with a 24-hour trading volume of $36.5 billion and a market cap of $114.4 billion (as of Aug 2, 2024). If you’re looking to earn a passive income with USDT, you can consider staking USDT with Bybit Savings. Bybit is currently holding an exclusive USDT staking event in which you can earn up to 300% interest for both fixed and flexible terms.
2. USD Coin (USDC)
USD Coin was created by an entity called Circle, composed of multiple well-known figures in the crypto world. The coin launched in 2018 and became one of the top stablecoins because it offered an alternative to USDT. While Tether's holdings remained a mystery at the time, USDC provided proof of its backing by assets derived from the U.S. dollar. This transparency and stability gained from its fiat backing led to USDC taking the number two spot in terms of the amount of USDC being traded every day.
In July 2024, USDC pairs experienced a significant boost in trading volume, reaching $135 billion on centralized exchanges and fueled by market inflows and the new EU Markets in Crypto-Assets (MiCA) regulatory framework. This surge coincided with a 5.4% increase in USDC's market capitalization, pushing it to $33.6 billion. Circle's early compliance with MiCA (becoming the first stablecoin issuer approved under these regulations) played a crucial role in this growth, highlighting the importance of regulatory readiness in the expanding crypto landscape.
USDC’s 24-hour trading volume is currently $8.8 billion, and its market cap is $33 billion (as of Aug 2, 2024). Stablecoin investors looking to earn a safe return can visit Bybit Savings to earn up to 500% APR on their staked USDC.
3. First Digital USD (FDUSD)
First Digital USD (FDUSD), launched by First Digital Labs in June 2023, is rapidly establishing itself as a top contender among stablecoins. Engineered to offer a seamless blend of stability and innovation, FDUSD is fully backed by the U.S. dollar, ensuring a 1:1 peg with the fiat currency. This financial structure is fortified by assets held in fully segregated, bankruptcy-remote accounts, providing robust security and trust to its users.
FDUSD's journey began under the auspices of First Digital Labs, a Hong Kong–based financial firm recognized for its pioneering efforts in digital asset custody and trust services. The introduction of FDUSD coincided with new crypto regulations in Hong Kong, positioning it as a stablecoin designed to cater to both regulatory compliance and user security. The stablecoin's launch was met with enthusiasm, quickly achieving a market capitalization of $1 billion, a testament to its acceptance and potential within the crypto market.
What sets FDUSD apart is its commitment to maintaining rigorous custodial arrangements and providing transparency through regular independent attestations of its reserves. These measures ensure that each token is indeed backed by a corresponding U.S. dollar, promoting reliability and stability. Moreover, FDUSD's programmable features allow it to support a range of financial applications, from escrow services to complex financial contracts, all without intermediaries.
For all of these reasons, FDUSD stands out as one of the best stablecoins because of its robust regulatory framework, high degree of asset protection and innovative approach to digital finance, making it a prime choice for users seeking stability in the volatile cryptocurrency market.
FDUSD’s current 24-hour trading volume stands at $7.3 billion, and its market cap is $2 billion (as of Aug 2, 2024).
4. PayPal (PYUSD)
PayPal USD (PYUSD) is emerging as one of the leading stablecoins in the cryptocurrency landscape, distinguished by its robust backing and seamless integration into the digital payments ecosystem. Launched by PayPal in collaboration with Paxos Trust Company, PYUSD is fully backed by U.S. dollar deposits, short-term U.S. Treasuries and similar cash equivalents, ensuring a stable 1:1 peg with the U.S. dollar. This backing is regularly verified through monthly attestations by an independent third-party accounting firm, thus adding an extra layer of transparency and reliability.
One of the key advantages of PayPal USD is its deep integration within PayPal's vast payment network, making it a practical choice for a wide range of transactions that include person-to-person transfers and commercial payments. PYUSD is designed to reduce friction in digital transactions, supporting seamless transfers on platforms like Ethereum and Solana, which enhances its utility in faster and cost-effective global payments. The PYUSD stablecoin is also engineered to support next-generation payment systems, allowing businesses and developers to leverage its stable value in innovative financial applications.
Moreover, PayPal USD’s rollout includes features that cater to both individual users and enterprises, offering functionalities such as easy conversion between PYUSD and other supported cryptocurrencies within the PayPal ecosystem. This broad accessibility — coupled with PayPal’s reputation and operational expertise in digital finance — positions PYUSD as a potent tool in the evolving digital currency space, promising stability, extensive usability and regulatory compliance.
Its current 24-hour trading volume stands at $9.3 million and its market cap is $622.5 million (as of Aug 2, 2024).
Best Crypto-Backed Stablecoins
5. Dai (DAI)
The Maker Foundation created the DAI stablecoin in 2017 when the mere idea of a crypto-backed stablecoin seemed risky and unrealistic. While DAI was originally created to provide a non-volatile lending asset for businesses and individuals, Maker eventually gave governance of DAI to MakerDAO.
One of the critical mechanisms that have ensured DAI’s stability is its overcollateralization strategy, primarily using Ethereum. This method has proven effective, especially during volatile market conditions, in helping DAI maintain its peg to the U.S. dollar. In recent updates, the MakerDAO community has been active, proposing strategic allocations of DAI into other stablecoin projects like USDe and sUSDe, indicating a proactive approach to diversification and yield optimization within the DeFi ecosystem.
DAI's supply has notably increased by 20% over the past three months, reaching a market cap of $5.3 billion (as of Aug 2, 2024). Its 24-hour trading volume stands at $205.3 million. This growth reflects its increasing adoption and the trust users place in its stability mechanisms. Additionally, DAI has been integrated into new blockchain initiatives, suggesting an expanding role beyond traditional DeFi applications. These developments underline DAI's adaptability, as well as the MakerDAO community's commitment to maintaining DAI as a fundamental component of the DeFi landscape.
6. Ethena USDe (USDE)
Ethena's USDe is emerging as a standout among stablecoins, leveraging innovative financial strategies to maintain stability and generate yield and positioning it as a leading choice for savvy crypto users. As a synthetic dollar, USDe distinguishes itself by operating entirely within the crypto ecosystem backed not by traditional fiat or commodities, but by a sophisticated arrangement of Ethereum and its derivatives. This structure allows USDe to offer a censorship-resistant, scalable and stable currency option, addressing the common stablecoin trilemma — balancing decentralization, scalability and stability without sacrificing one for the others.
The core of USDe's stability mechanism is a delta-neutral strategy that mitigates the volatility typically associated with crypto-backed assets. By creating short positions in derivatives alongside crypto collateral, USDe ensures that any drop in collateral value is counterbalanced, thus maintaining its peg to the dollar. This not only enhances its stability, but also provides a lucrative yield-generating opportunity through the derivatives market. These features make USDe an attractive option for users looking for a stablecoin that combines the benefits of traditional stablecoins with the potential for high returns, making it a compelling addition to the digital finance landscape.
Its current 24-hour trading volume is $98 million, while its market cap is $3 billion (as of Aug 2, 2024).
Best Algorithmic Stablecoins
7. USDD (USDD)
USDD, the stablecoin launched on the TRON network, aims to position itself prominently in the DeFi sector. Despite experiencing some volatility in April 2024, when it briefly depegged from its $1.00 target down to $0.97 amid broader issues in the crypto markets, USDD has demonstrated resilience through strategic enhancements to its stabilization mechanisms.
A significant upgrade to USDD has seen it transform into the first overcollateralized decentralized stablecoin. By securing its value with a robust collateral pool that includes highly liquid assets like BTC, TRX and USDT, USDD has bolstered its market position. The real-time collateral ratio maintained by the Tron DAO Reserve significantly exceeds the 100% mark, aiming to provide a stable and secure backing for the coin. This upgrade has not only enhanced trust in USDD's stability, but also its appeal as a secure digital asset within the volatile cryptocurrency market.
Furthermore, USDD is supported by a comprehensive ecosystem on TRON, one of the largest stablecoin networks. This support includes widespread adoption across multiple major blockchain platforms, as well as integration into numerous popular crypto exchanges and DeFi platforms. Backing by industry leaders and a high level of transparency in its operations contribute to USDD’s growing reputation as a reliable stablecoin, even as it navigates challenges common in the DeFi space.
USDD’s 24-hour trading volume stands at $1.04 million, and its market cap is at $740.6 million (as of Aug 2, 2024).
8. Frax (FRAX)
FRAX initially made headlines in 2019 as the world’s first fractional algorithmic stablecoin. The coin maintains its peg by making use of two reserves: Fiat-backed USDC, and FXS, the Frax ecosystem's native token. The ratio of USDC to FXS depends on the collateral ratio, which varies the amount of USDC and FXS needed to mint $1 worth of FRAX. This makes FRAX a partial algorithmic stablecoin, since it has fiat backing on top of its algorithmic backing.
Over time, Frax has evolved to emphasize security and stability, shifting toward a fully collateralized model. This change was driven by community governance, reflecting a proactive approach to adapting to market needs and regulatory environments. The decision to fully collateralize FRAX underscores its commitment to reliability and trust, especially important in a landscape often shaken by volatility and uncertainty.
Recently, Frax Finance has announced ambitious plans to expand its reach and utility. It aims to achieve a total value locked (TVL) of $100 billion through its road map, signaling aggressive growth and expansion strategies. Additionally, Frax has integrated into new ecosystems, such as the Cosmos network, thereby broadening its interoperability and potential use cases across different blockchain environments.
The ongoing developments in Frax, including its full transition to overcollateralization and expansion into new blockchain territories, highlight its position as one of the top stablecoins by fostering a stable and secure option for digital asset transactions. These steps not only enhance the intrinsic value of Frax, but also contribute to its reputation as a robust and adaptable stablecoin in the competitive DeFi landscape.
FRAX’s current 24-hour trading volume stands at $27.5 million, and its market cap is $646.3 million (as of Aug 2, 2024).
Best Commodity-Backed Stablecoins
9. Tether Gold (XAUt)
Tether Gold (XAUt), launched in January 2020, stands out as one of the premier gold-backed stablecoins. Each XAUt token is backed 1:1 by a fine troy ounce of physical gold held in secure vaults in Switzerland, providing token holders with the tangible security of gold combined with the liquidity and ease of a cryptocurrency. This gold backing is verified through regular audits, ensuring transparency and trust in the token's value.
What sets Tether Gold apart is its accessibility and ease of use. The token can be divided into increments as small as 0.000001 fine troy ounce, allowing for flexibility in investment sizes. Moreover, XAUTx tokens can be traded 24/7 on various exchanges, making them highly liquid compared to physical gold. For those looking to redeem their tokens, the process is straightforward, though it requires a minimum amount to redeem a full gold bar.
Recent developments have reinforced Tether Gold's position in the market. Tether Gold has expanded its accessibility by being listed on additional crypto exchanges such as BTSE, increasing its availability to a broader audience. This expansion is indicative of its growing popularity and trust as a digital alternative to traditional gold investments.
Overall, Tether Gold's blend of physical asset backing, digital flexibility and rigorous compliance measures make it a compelling option for investors seeking stability and security, akin to gold with the benefits of digital assets.
XAUt’s current 24-hour trading volume stands at $14.8 million, and its market cap is $604.6 million (as of Aug 2, 2024).
10. PAX Gold (PAXG)
Pax Gold (PAXG) was launched in September 2019 by Paxos, a regulated blockchain infrastructure platform. PAXG distinguishes itself by allowing users to own physical gold in a digital form, each token backed 1-to-1 with a troy ounce of a London Good Delivery gold bar stored in secure vaults. This unique approach to combining the stability of gold with the efficiency of blockchain technology makes Pax Gold one of the best stablecoins for investors seeking a safe haven asset in the digital space.
PAXG's adoption has grown significantly, reflecting in its integration into various platforms and the broadening of its usability. Recently, PAXG was integrated on the XPOS system by Pundi X and Scoin, facilitating the purchasing and transition between physical and digital gold in the South African market. This move not only enhances the liquidity and accessibility of PAXG, but also bridges the gap between traditional gold investments and modern digital finance solutions. Such integration is a testament to PAXG's growing importance, as well as its potential to reshape how gold is traded and owned globally.
PAXG’s current 24-hour trading volume stands at $16.7 million, and its market cap is $456.4 million (as of Aug 2, 2024).
What to Do With Your Stablecoins
Staking for Yields
To earn interest on any of the top stablecoins or cryptocurrencies, investors can use platforms like Bybit Savings for staking. On top of offering a competitive yield, Bybit offers the advantage of staking under both flexible and fixed terms. This gives investors the freedom and flexibility to pick a staking period that suits their risk appetite. Register with us and get started on your passive income journey today.
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Bybit Dual Assets offers upgraded features and flexibility for participants to maximize their yields despite market volatility. Simply indicate your desired price to buy or sell your crypto assets based on the predicted market trend. You'll earn interest yields, regardless of your choice of market predictions, upon a predetermined settlement date.
Learn more: What Is Bybit Dual Asset 2.0?
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The Bottom Line
We hope our guide has helped you decide what the best stablecoins are and educated you as to their differences. The most popular stablecoins are likely to continue seeing favorable trading volume trends as more investors shift their interest to coins backed by some form of assets, which offer transparency when it comes to what they're backed by.
Whether during periods of high volatility or steady market growth, stablecoins represent a crucial aspect of digital finance, offering a dependable store of value and a medium of exchange. Looking ahead, as the digital economy continues to expand, stablecoins are poised to play an increasingly significant role, bridging traditional finance and the burgeoning world of DeFi.
Embrace the stability and potential of stablecoins as part of your investment strategy, and stay tuned for future developments in this exciting sector.
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