Just as they say, you should not keep all the eggs in the same basket; it is mandatory to diversify your investment portfolio. Like stock market investments, Cryptocurrencies also have a degree of volatility that is hard to withstand.
It is good to put your money on the big crypto market giants like Bitcoin, Ether, Dogecoin, Shiba Inu, and others. But, all of these coins are highly volatile. So how do you make up for the risky investments you have made in these Cryptocurrencies?
The answer is– by investing in stablecoin. By investing in a stable coin like the USDC or USD Coin, you can minimize the risk of your cryptocurrency investment.
Backed by the fiat money of the United States of America, USD coins are the stablecoin with the same financial value as the USD. Therefore, the USDC is a hedge against volatility that you can take advantage of when trying to balance out your Cryptocurrency investment portfolio.
So, if you are curious, the following article will help you know and understand the value of USDC, the benefits of investment in this Cryptocurrency, and the pros and cons of this Cryptocurrency.
What IS USD Coin?
USD coin is a Cryptocurrency backed by U.S. dollar assets. Unlike all the other cryptocurrencies with no assets backing them, USD coins have U.S. dollar-based assets backing them up.
The value of a USD coin is the same as the U.S. dollar. There is a financial institution that regulates the USDC and its value. The USDC is managed by a private institution named Circle, and one should not confuse it with the Central Bank Digital Currency.
USDC is a joint effort of the crypto exchange platform named Coinbase and Circle.
This authority tokenizes the U.S. dollar, turning them into cryptocurrencies. Here are the three steps to tokenize the U.S. dollar into USDC–
- A user needs to send U.S. dollars to the issuer’s bank.
- Then the issuer can use the smart contract to create a USDC of the equivalent amount.
- The issuer then sends the USDC to the investor and reserves the U.S. dollars sent by them.
If you look at how notoriously the price of the Cryptocurrencies like Bitcoin and dogecoin fluctuates, USDC is much safer. It is an open-source project and not a currency system backed up by the government of the United States.
As of 2022 April, there are 51.39 Billion USDCs in circulation.
The USDC is supported on several blockchains like–
- EthereuSolana
- Solana
- Algorand
- TRON
- Stellar
USD Coin Key Features
Like most, the cryptocurrency USD coin is also a decentralized token, but there is one major difference. It is backed up by the fiat money of the United States. These are not the CBDC, but for all the USDC issued to the investors, there is an equivalent amount of USD reserved. Here are some of the key features of the USDC–
- USDC is a stable coin backed up by the U.S. dollar.
- There are segregated accounts that hold the UDSC reserve assets.
- It is an open-source currency, meaning anyone can contribute to it.
- On the Ethereum blockchain, USDC is held with a 1:1 representation of one U.S. dollar.
- USDC is an ERC-20 token, and it is supported by several blockchains starting with Ethereum.
- This is a cryptocurrency with high liquidity. You can always redeem your USDC for the equivalent value of U.S. dollars.
- USDC adheres to the concept of DeFi, which negates the need for intermediaries. It helps streamline buyers, sellers, and investors, removing all the third-party involvements in trades and businesses. This Cryptocurrency makes financial platforms more accessible to business people.
- USDC makes payments faster. It offers the benefit of fast transaction of the Cryptocurrencies while also keeping assets reserves, making your money secure and more fluid than ever. Global businesses can greatly benefit from USDC.
Benefits Of Investing In USD Coins
Multiple benefits and use cases of the USDC are there. For instance–
Hedge Against Volatility
Unlike Bitcoin and the other Cryptocurrencies, USDC is more immune to volatility. Priced as the same as the fiat money of the United States, this Cryptocurrency is immune to volatility. This stablecoin has assets reserved to back it up. So you don’t have to worry about losing your money.
Valued In Fiat Money
Since the USD coin is valued in the fiat money of the U.S, the exchange platforms can price the digital assets using USDC.
Stable Price-Pegging
The coin can represent fund investment or equity ownership. You can also use the USD coins to represent liabilities and trends.
Best For Global Business
Global businesses can make their business transactions much faster and quicker using USDC. Since it is valued equally against the USD, it is a great option for businesses.
Immune To Inflation
U.S. investors who are worried about inflation can seize the value of their money by investing in USDC.
Compatible With Several Blockchain
Ethereum, Steller, Tron, and Solana are some of the Blockchains that support the USDC tokens.
Pros & Cons Of USD Coin
Understanding the USDC is not possible without analyzing the pros and cons of Cryptocurrency. Here are some pros and cons to help you–
USD Coins Pros
- This Cryptocurrency is immune to volatility.
- The currency is backed up by reserved assets.
- You can use it as a hedge against inflation.
USD Coins Cons
- There is no price appreciation.
- There is no mention of the amount/value reserve asset for the USDC.
- It is not totally immune to U.S. dollar price inflation.
Frequently Asked Questions
The USDC is growing in the Crypto market. As a result, there are more questions related to this Cryptocurrency. Here, I have answered a few of them so that you can understand them better.
Is Usd Coin Worth Buying?
If you are trying to reduce the volatility of your Crypto investment portfolio, it is one of the best options out there. The currency has reserved assets backing it up, which makes it the best option to balance your portfolio.
What Is a USD Coin Used For?
USDC is a decentralized cryptocurrency that you can invest in. Businesses around the world use this Cryptocurrency for business-related transactions. Investors use this coin for balancing their Cryptocurrency investment portfolio.
Is Usd Coin Legal?
The USD Coin is not illegal. The Circle is a platform that tokenizes the USD and makes cryptocurrencies by reserving the equivalent amount of USD. It is a stable coin and is much less volatile than altcoins. Furthermore, Circle abides by the federal laws of the United States. Hence USDC is not illegal.
Conclusion
If you are an investor and looking for an investment option that diversifies and stabilizes your portfolio, then the USD coin is the best option. As an investment, it is a good choice if you want to invest in a stable Cryptocurrency that is immune to inflation and volatility.
Do you have any further queries? If you do, you can ask us in the comment. We will be happy to answer your questions.
