Greetings friends, I expounded the use cases of altcoins and stable coins through this article. I believe you would love to take a perusal into my assertions.
Introduction
The real world financial scenario which was duplicated in the virtual sphere by the introduction of the Bitcoin in 2008 has gained credible traction since its evolution. Although there were other virtual tokens that were in existence before Bitcoin like: B-money, Hashcash, ecash etc. These early virtual tokens also assisted in the brain behind the creation of Bitcoin.
Nonetheless, after Bitcoin was invented in 2008 to operate on the blockchain, other virtual tokens have also emerged to function alongside Bitcoin. These include but are not limited to: hive, Leo, curb, pepe etc. At this point, let's take a lucid perusal into the underscored caption through the exegesis below.
The Concept of altoken.
altoken is just an abbreviation of alternative token. This Intel is simply an alternative to the Bitcoin token which is believed to be the leader in the cryptocurrency virtual industry. Given the mesmerizing price of Bitcoin and its modus-operandi in the blockchain technology, developers and Investors alike sought for composite means to gain a space in the blockchain invention and also maximize income, which actually gave rise to alternative tokens.
Relative to the scalable nature of cryptocurrency in general, Investors and developers believe that there is potential in every token despite its bantam price at the moment. For instance Bitcoin price was pegged at $0.4 in 2010 and currently as at the time of writing this article, the price of Bitcoin is pegged at $26,578 according to Binance exchange rate.
No one would believe that BTC would ever rise to this incredible price. Nonetheless, altcoins also have the potential to increase in price like the Bitcoin which is why investors would always buy to hold irrespective of the rate of such a token.
Finally, altcoins have a higher Investment yield when compared to opportunities in stable coins, this could range from 10 to even hundreds of APY making it highly profitable but not also decimating the risk of losses in token value given to the apparent rate of volatility spotted in its dynamism.
The Concept of Stable coins.
Stable coins on the other hand are virtual coins which maintain their respective values close to or equal to one dollar. They are not scalable or volatile when compared to altokens.
The need for a stable coin is an idea conceived from the real financial world, where we always observe the fluctuations in different regional currencies either devalued, equaled or scaling above the dollar given to their economic importance. Since we have the US dollar to be the parameter for the global exchange rate, the same applies to virtual stable coins, giving it the right to determine the real value of every other token also polarized in dollars.
We have different stablecoins like hive backed dollar (HBD), USDT, USDC, UST etc. All these are stable coins and they have their respective values pegged close to, equilibrated or above one dollar. Finally, we will deduce that what makes a coin stable is its inability to easily swing like other altcoins in the virtual sphere.
Consequently, the interest rate of stable coins are always very small, ranging from 5, 10-20% APR given to the fact that they are hedge funds that are also meant for speculations in trending cryptocurrency markets.
Having gained a credible knowledge on the concept of altcoin and stable coins, let's take a financial scrutiny on when to hold these currencies.
Advantage of holding altcoins.
At this point, we'll be considering the need and possible periods for holding altcoins.
Affordable Investment Opportunity.
Altcoins are credible investment opportunities in the decentralized finance (Defi) system. Moreover, they are also of less value when compared to Bitcoin. For instance it is easier to purchase Leo or hive which is a prototype of altoken than to purchase Bitcoin.
Hence, altcoins offer investment opportunities to all calibers of investors. For instance, since it's not easy to HODL Bitcoin, we can purchase other minor token with lesser value to add to our portfolio.
High Rate of Investment Returns.
Investors are lured by default to financial opportunities with high rates of returns even when such an investment isn't feasible. Consequently, given the high rate of volatility in altcoins, there is the proclivity of recovering every loss and also compounding some values at each phase of Investment.
For instance, in cubdefi, an investor can earn upto 114% APR by stacking BHIVE-BNB pairs or about 78% APR on BHIVE-BLEO pairs token. This is to show in a bit the behemoth returns accruable to Investors who invest into altcoins.
Moreover, there is this theory known as altcoin season. It is a period of increasing value of different altcoins in the market after an apparent surge in the Bitcoin. During these periods, Investors enjoy a higher rate of returns as opposed to when respective token prices are relatively low.
Trading opportunities.
Almost every altcoins has their respective exchanges where they are being traded. For instance one can trade the hive token on over 13 exchanges not limited to Binance, Huobi, Upbit etc. In essence, altcoin or altcoins give Investors the opportunity to trade on preferred exchanges without limit.
Advantage of holding Stablecoins.
Hedging Against Deflation.
The cryptocurrency market is believed to be very volatile given the impact of certain variables like Whales action, flooding etc. Nonetheless, stablecoins are good measures for curbing inflation outside of burning, and this is done by using the already Stablecoin in circulation to contract the flooded token to push prices upwards again.
For instance, it is believed that the HBD is meant serves as a liability token in the Hive ecosystem meaning that every hive is meant to be contracted using the available HBD which further means that at periods of deflation, the availability HBD in circulation will be used in reducing the number of hive in circulation as to keep the hive price competent against negative market price Impact.
High Rate of Returns.
There are many Defi systems that pay high rates of returns to their liquidity suppliers since they pay no other form of rent to anyone when compared to the rate of tax and rent usual exchanges pay.
For instance, one can stake some USDJ in
sun.io to earn above 21% APR on his staked fund and other Defi protocols. Moreover, we also have the Hive ecosystem which also pays 20% APR for locking one's stablecoin (HBD) in savings which could be withdrawn in a three day interval.
Amassing of Other Coins.
We believe that the cryptocurrency market has three major trends: up, down and ranging market. Nevertheless, the downtrend or bear market although has a malignant effect on most traders and holders alike, it's also a period for buying cryptocurrency in large quantities given to price devaluation.
Consequently, traders or holders that have a large quantity of stablecoins are at advantage to accumulate more of the altcoins using their stacked stablecoins.
The Best Coin to Hold.
I have to emphatically state that there is no best coin to hold but a trader or an investor's preference at each time should determine his level of discretion and command over the market.
For instance, it is best to hold altcoins during the bull run and contrarily, it is also best to hold stablecoins in a bear market but all these are subject to certain factors like: trading experience, pool rate of returns, etc.
For instance, an investor may spot a high paying stablecoin liquidity pool in the bull market and given to undeserving past experience in holding altcoins, he would rather lock his fund in the stablecoin LP than risking for another probable benignly or malignant experience given to his level of market forecast and speculation.
Conclusion
Finally, it is best to stake one's coin in a liquidity pool against incurring unnecessary losses. Thank you for going through.
References:
Twitter shared link.
https://x.com/okorodavid19/status/1706199022841504110?s=20