Cryptos are volatile and they don’t always go up. When corrections occur they can be very severe and stressful for those HODLers who may be in a little over their head.
If you’re a sharp investor then you’d know that everything has its price, and after a good run the market mania can drive a crypto coins price up a little bit ahead of itself. When this happens it is often a good opportunity to take some profit and wait for sanity to prevail before buying back in at a more reasonable level.
But what do you sell for?
In most jurisdictions around the world, converting cryptos back to fiat currency (government issued moneys) can incur a very large tax liability, and who wants that? Some people might prefer to rely on anonymity measures and try to stay one step ahead of the tax office by laying low. They might prefer to use something like localbitcoins.com to try and stay off the radar as no doubt the exchanges who insist on enforcing KYC (Know Your Customer) regulations will report you to the tax office in a heartbeat if they come under pressure.
Really what is ideal is to keep your crypto wealth IN the crypto ecosystem so that no tax liability is incurred. But what cryptos are stable in a market downturn?
Well I’m glad you asked because I’ve been trying to build a list….
1. Tether – USDT : This one appears to be the #1 choice for many big crypto traders. It is basically an Exchange Traded Fund (ETF) concept which accepts real US Dollar deposits and issues USDT as digital tokens to represent the US Dollars on deposit. It therefore has a pretty solid peg to the USD and usually only fluctuates between about 0.97 and 1.03 (except in extreme circumstances). It does have counter-party risk though, as the USD deposits are all held in the bank so it is somewhat centralised and if there is a bank issue they could just disappear overnight.
2. Steem Dollars – SBD : If you’re reading this on Steemit you know what these are. They are loosely pegged to the USD and while there has been some big fluctuations in the past the SBD should always find an equilibrium at around the $1 USD mark due to the way the steem platform is designed. Any time you can pick up SBD in the high 0.80s or low 0.90s it is a good time to buy and this is often the case when the broader crypto market is selling off. The risk here is that you probably don’t want to have a lot of wealth stored on a hot wallet, plus everyone can see you have it so you’re also making yourself a target.
3. BitUSD / BitCNY : Grouped together as effectively SmartCoins of fiat money on the BitShares platform. Basically they are designed to be valued as pegs against the US Dollar and the Chinese Yuan, but are backed by BTS collateral. Unfortunately liquidity on the BTS platform is not great so the buy/sell spreads can be wide and you may often have to pay a premium to get these SmartCoins. The risk here is that if the value of BTS (the collateral) drops too low to maintain the fiat peg then it triggers a “Black Swan” event that redeems your SmartCoins for the remaining collateral, which means you’ll end up holding a bunch of cheap BTS. That can be good or it can be an issue, depending on your perspective.
4. BitGold / BitSilver : More SmartCoins on the BTS platform but this time there is no peg to fiat currency and they are instead pegged to the price of gold and silver, so there is less risk from some recalcitrant government devaluing or otherwise trashing their fiat currency. As a bit of a gold bug and a big believer in “sound money” these ones do have good appeal to me, but they suffer greater liquidity issues than the fiat SmartCoins and they have the same risk of Black Swan events occurring.
5. Corion – COR : The new kid on the block has just completed ICO and is yet to be listed on any exchanges but this is an interesting coin that uses a dynamic expanding/contracting money supply mechanism to gravitate it’s price toward $1 USD. It is yet to be proven, but it may end up being better than the others I've listed if it works as designed as an effective USD peg without the counterparty risk of Tether, the wallet/transparency issues of Steem Dollars or the liquidity/collateral issues of the SmartCoins. The big test for this coin will be the first big market dump that drops it below $1 USD as it relies on burning transaction fees to contract the money supply and that might be a slow way to get back to $1 USD if people are holding for speculative purposes rather than conducting business and incurring transaction fees.
So there they are, my 5 (actually 7) stable crypto coins to get into when the market mania has run its course and a correction is imminent. If you are someone like me who thinks ahead and has contingency plans in place for when things turn bad then familiarising yourself with these cryptos will ensure you are ready to dodge market volatility without incurring nasty tax liabilities.
If you have any other suggestions for stable cryptos, please comment below because I am always looking for more options!
Images and Credits :-
http://tether.to
https://steemit.com
https://au.pinterest.com
https://corion.io