Much like with traditional cryptocurrencies, getting involved in the stablecoin space can be daunting. There are so many different assets to choose from - some of which could entirely be scams. It’s hard to know which is best, and the wrong choice could cause you to lose all of your investment.
Fortunately, there is a safe way to invest in stablecoins. This guide will help you break down the best ways to do so.
Examining a Stablecoin
For one, it’s important to look at the background of a stablecoin. Examine its team, its mission and what the project has already accomplished. Take Gold Exchange, for example. This platform offers the Gold Coin stablecoin - an asset tied to the value of gold.
The platform has various use cases, such as anonymously investing in the precious metal, as well as some useful exchange features for better trading. You can see on the website that its designers have over 20 years of experience in the trading industry. Plus, you can get involved right away with just a debit or credit card. Most exchanges require you to do a whole identity check which can take days.
That’s just one example, however. When researching other stablecoins, take a look at how they’re audited, what their team is like and what the community thinks about a project. Tether is another example, though a bad one. Backed by the US dollar, Tether was the first stablecoin to gain notoriety in the crypto space. This is because the group won’t reveal how much money is in its vaults.
Essentially, Tether could totally be lying about how much it has stored. This would mean the project’s stablecoins are literally valueless, as there isn’t a real dollar to back them up. It’s best to stay away from stablecoins like this. They don’t have investor’s best interests in mind.
Once you’ve researched a stablecoin enough for your liking, it’s time to invest. How do you do so safely? Here’s how.
Safely Acquiring Stablecoins
When trading stablecoins, it’s best to head towards an asset’s dedicated exchange if they have one. Gemini Dollar has the Gemini Exchange. Binance’s BNB works best over there. Coinbase’s USDC stablecoin is ideal for traders on that platform. It makes sense, really. The team designing a stablecoin offers the best platform for using it.
Also, if the platform doesn’t have any suspicious conversation around it, you can be sure it’s worth investing within.
Most platforms should require you to sign up, regardless of if they have an identity check or not. Once done, check to make sure they offer two-factor authentication (2FA) and set that up. This means the platform actually cares about your security.
Add a payment method within your account, and feel free to start trading. However, note that no matter the platform, it’s best not to keep your assets in its online wallet for long. Online wallets are susceptible to being hacked at all times. While top platforms will have better security processes in place, they’re not invincible.
Once you have some stablecoins, move them into a desktop or offline wallet if possible. Since basically, every stablecoin is an Ethereum-based ERC-20 token, it shouldn’t be too hard to find one that works for you. Then, you can use these assets however you wish!
Now it’s time to talk about safe trading precautions.
Properly Trading Stablecoins
If you’re using stablecoins as payment, for instance, ensure the platform has some sort of escrow service. Basically, ensure your funds are not released until the provided service has been completed. That way, there’s no risk of a scam. Remember, if you send your stablecoins away by accident, there’s no recovering them. This is the case for all cryptocurrencies, stable or not.
Also, when trading, it’s simply easier to do so on an exchange. These are reliable platforms that will instantly confirm the trade. If you’re on a peer-to-peer trading site, for instance, be careful. Make sure what you’re buying is legitimate and that the recipient will surely provide the requested good or service. Otherwise, you’re scammed for good.
Now you’re much more aware of how to safely acquire and trade stablecoins. From here, do some research on the best stablecoins for your investment personality. Once done, you can now acquire and trade them safely.