Stablecoins vs Bitcoin. What’s Better for Crypto Loans?

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Why Bitcoin is not enough?

What are the drawbacks even of the most trusted, large and secure cryptocurrencies? 

First of all, it’s their volatility. The price of Bitcoin or Ethereum can drop or surge by 5-10%, and sometimes even 15-20% in one day. For some, it provides an opportunity to take quick profits. But for the others, it results in money losses and inability to plan. 

On a larger scale, such significant price fluctuations undermine the total trust in crypto. The fear of losing their hard-earned money is a major reason why large investors and regular users are afraid of putting their capital into crypto. 

And even for those who believe in crypto enough to have bought some Bitcoin, it remains an uncomfortable asset for daily use. According to last year’s research by Chainalysis, only 1.3% of all Bitcoin served as a means of payment for goods and services. The greater part of Bitcoin is still used in speculation. 

As you know, Bitcoin was originally designed as a cryptocurrency for daily peer-to-peer transactions — but it ultimately failed to become one. A single Bitcoin transaction may take up to 30 minutes, and the coin’s price can drastically change in just a few hours. This is not very user-friendly. 

What’s the deal with stablecoins?

Here is where stablecoins come on stage. Being pegged to US Dollar and other major fiat currencies, stablecoin price always remains the same $1, €1, and so on. Such stablecoin as Tether (USDT) is accessible on many blockchains and is thus more convertible, easier to trade, and faster — an average Ethereum-based Tether transaction takes up to 30 seconds.  

Total stablecoins’ market cap is rapidly growing.

Stablecoins allow users to take advantage of blockchain-based cryptocurrencies without their inherent volatility. This is why at CoinRabbit, we do crypto lending in USDT. 

Tether is the largest stablecoin and the 4th largest cryptocurrency with a $19.2 billion market cap and twice as bigger 24h trading volume. It was launched back in 2014 and has gained enormous traction since.  

Why is stablecoin one of the best cryptos for daily use?

• No volatility. With 1 Ether on 1 BTC, you never know how much you’ll be able to buy with them tomorrow. But with Tether, there’s no chance it either surges or drops in price. You always know the USDT price will be $1 and can properly plan.
• High accessibility. Tether is available on Ethereum, TRON, Algorand, Bitcoin (Omni), and EOS blockchains. You can easily swap between them.
• High speed. Most of the blockchains USDT is based on are much faster than Bitcoin’s. For instance, USDT-ERC20 (Ethereum-based Tether) transactions only take 15-30 seconds. And if it comes to cross-border payments, it will take exactly the same time — not hours and days as with fiat.
• Low fees. Fiat transactions are usually done with middlemen that change their fees. In Tether, these intermediaries are eliminated, which means you only have to pay a network fee to proceed a transaction. In most cases, these fees are much lower than in fiat.
• High compatibility. For example, Ethereum-based Tether is compatible with hundreds of ERC20 assets and is easily exchangeable with them.
• Easy cash out. You can withdraw your USDT to fiat in a few steps at such crypto exchanges as Kraken, and many others. Crypto lending at CoinRabbit can end up with getting cash for you — and that’s totally fine!
• Easy price formation. If you are a merchant, you can set a certain price in USDT on your services without worrying you will lose profits due to price volatility.
• Automatic transaction confirmation. Another perk of a blockchain-based currency: there are no cases it needs a manual transaction approval. Everything is done fast and censorship-free.

Tether may look volatile at its all-time price chart, but mind the indicators on the right: fluctuations happen in an extremely narrow range. Also, see how the trading volume (grey) surged in the last 1.5 years. 

How can I use my Stablecoin?

• Pay. Many crypto-oriented services accept Tether. Due to all reasons listed above, it’s faster and more convenient to use it for payments than Bitcoin.
• Send. Fast and secure transactions can be made from and to any place on Earth connected to the Internet. Send Tether to your family and friends.
• Trade. Convert USDT to other currencies and take profits from their price fluctuations. Use Tether to protect yourself from money loss. Be careful and do your research before this extremely risky activity!
• Store. Holding Tether on a cold wallet is a good way to preserve your money. Think of it as storing your fiat USD, but without banks’ or governments’ influence.
• Accept. Due to the reasons listed above, for many buyers, Tether is the first cryptocurrency ever used. Take advantage and bring these users to your e-shop first.

Why is USDT reliable?

• It is protected by fiat USD. Every Tether is backed by a real US Dollar stored by Tether and its partner financial institutions at a 1-to-1 ratio. USDT’s crypto value is not taken out of thin air.
• Transparency updates. Tether regularly publishes its balance sheets to ensure digital coins are backed by fiat Dollars.
• Blockchain-backed security. Every blockchain Tether is based on, is a trusted and secure network that has historically shown to be stable and reliable.
• Robust partnership. Tether partners with major crypto exchanges which shows it is trusted by the mastodons of crypto.
• The project is evolving. Tether constantly rolls out new features and assets, one of such being Tether Gold (XAUT). This signifies that the team is out there working on the project and it is safe.

Drawbacks of Tether

The crypto market is young and rapidly growing, and there are no perfect projects which have a 100% reputation. USDT is often criticized for being overly centralized because it is controlled by a single entity, and for being controlled by the banks. It is also said that Tether is trust-dependent — unlike truly decentralized cryptocurrencies, in the case of Tether, we have to trust the entity that runs USDT to use it. All these claims are true: however, Tether remains the 4th largest crypto and the most robust stablecoin. People seem to trust it.  

Alternative to Bitcoin

At CoinRabbit cryptocurrency lending service, you can get Tether for Bitcoin loan — bring some BTC and get USDT at a 14% interest rate that you don’t even have to pay monthly. The crypto lending program we offer you is a chance to make the most of your Bitcoin or Ethereum without even spending it. Lending cryptocurrency service CoinRabbit gives you a loan in 10 minutes without any credit checks. 

Conclusion

Those two types of coins have their advantages and disadvantages. Unlike Bitcoin, stablecoins have non-volatile price. It was originally introduced to minimize BTC volatility.

Nevertheless Bitcoins popularity, its price rises and falls, depending on the different factors like government for example which makes traders wait for the right time to exchange their coin. Stablecoins like Tether, whose value equals to any fiat currency, does not change, and helps to exchange them anytime. Due to that, people, who are fascinated by crypto, can invest in Bitcoin and stablecoins either and use them in any way possible.

We hope this little guide on what is a stablecoin was useful for you. Now you know why it is a robust alternative to Bitcoin in terms of everyday use. Try it out — head on to CoinRabbit and see what we offer!