Especially amongst new investors and crypto enthusiasts, there's always that argument on which to invest between Bitcoin and stablecoins like USDT and USDC.
Bitcoin is the first cryptocurrency that was established with use cases, and it has grown to become very popular in the financial market.
Stablecoins have been somewhat of an overlooked aspect in the crypto market. It wasn't until regulatory and volatility concerns caused many investors to lose confidence that stablecoins gained more attention.
After the creation of Bitcoin, many other cryptocurrencies soon popped up, including stablecoins like the USDT. But it can be a bit of a dilemma to choose between these two categories of cryptocurrencies.
So, we have made an article giving you insights into these two cryptocurrencies, their functions, and why you should choose any of them.
What Are Bitcoins?
Bitcoin is a form of digital currency that was created in 2008 by an anonymous individual or group known as Satoshi Nakamoto. It is basically a digital currency that wants to break free from the shackles of the centralized and conventional financial ecosystem. It wanted to be decentralized and free of intermediaries whenever a transaction was made between two or more people.
After it was created in 2008 and people began to use it in 2009, Bitcoin has grown to become the biggest and most prominent cryptocurrency in the crypto ecosystem. Investing in Bitcoin has become a full-time job for many people who are more attracted to crypto and want a share of its benefits.
It was the model used in creating Bitcoin that many other subsequent cryptocurrencies adopted, including altcoins, stablecoins, and meme coins. At the time of writing, Bitcoin has been trading at more than $24k, more than other cryptocurrencies. Comparing its market capitalization with others, Bitcoin is still the largest, with a close to $500 billion cap.
Why Do People Buy Bitcoin?
Many reasons prompt people to continue buying Bitcoin despite the warnings several governments and some organizations have issued about the cryptocurrency.
Preference Over Conventional Financial Institutions
The existence of Bitcoin came shortly after the financial crisis that rocked the world in the 2000s. These financial crises made many lose interest in traditional financial institutions and served as an eye-opener for many.
Bitcoin offers a promising solution to address the various issues associated with traditional financial systems. For instance, customers prefer to have greater control over their finances, rather than being subject to government regulations and censorship. Consequently, investing in Bitcoin is a preferred option for many, as it allows for better management of their funds.
If you have ever kept your money in the bank, you would know that the amount you earn as interest is nothing to write home about. Of course, one of the biggest things attracting people to invest in Bitcoin is the profits they make from the token. Some people have made millions and thousands of dollars just from investing in the token.
Considering that the price of Bitcoin was in cents when it was launched, and it is currently above $24k shows how much profit people have made from the token.
At its peak, the token was more than $68k in price. The price fluctuations of Bitcoin and other cryptocurrencies have always been appreciated, as it has helped many to make a lot of money from it.
Bitcoin is built on blockchain technology, and one of the most significant advantages is that operations and financial transactions are very transparent. If you use a bank, you will notice that some funds will be debited from your account without any explanation. That is different from Bitcoin and other cryptocurrencies. Every transaction is recorded on the blockchain, and the public can see precisely what transpired.
Diversification of Portfolio
Many people are investing in Bitcoin because they want to diversify their portfolio and make more profits through the crypto industry. Investors are increasingly drawn to Bitcoin as a valuable asset with impressive returns, second only to the stock market. Bitcoin is ideal for diversifying portfolios and hedging against inflation, much like gold. Unlike traditional financial institutions, Bitcoin is immune to many external factors.
Scarcity and Future Potential
The natural law of economics states that when something is scarce, its value naturally increases. The same thing applies to Bitcoin because it has a maximum circulating supply; when it reaches the maximum, no more Bitcoin will be mined or created.
What Are Stablecoins?
Stablecoins are cryptocurrencies that do not fluctuate heavily, like Bitcoin and other altcoins. Typically, these stablecoins are pegged to the US dollar, and they always try to maintain these pegs all the time.
Stablecoins are a type of cryptocurrency that assists in stabilizing the fluctuation in the value of other cryptocurrencies.
Just like you have the US dollars or Pounds in fiat currencies, that's the same way the crypto industry has stablecoins. While stablecoin volatility is very low, there are some cases where it has depegged during the financial crisis, like in the case of USDC.
Why Do People Buy Stablecoins?
There are several solid stablecoins, and the reasons that make people want to purchase a large number of stablecoins are not far-fetched, it includes the following:
Protection Against Inflation
For those living in countries where their national currencies are continuously decreasing due to inflation, stablecoins always come to the rescue due to less or no stablecoin volatility.
In most cases, stablecoins are always used to make crypto transactions in scenarios where banks can't be reached. They are even integrated as payment methods in many shopping sites and software.
Liquidate Other Cryptocurrencies
Stablecoins help with liquidation, as many cryptocurrencies, such as Bitcoin, can be converted to stablecoins, which are then exchanged with the US dollar or Pounds.
Get Around Fees
Many exchanges charge less or no transaction fees for stablecoins, so many traders prefer to use them. Cryptocurrencies such as Bitcoin and Ethereum require much transaction fees, reaching hundreds of dollars more than stablecoins.
Which One Should One Buy? Bitcoin or Stablecoins?
When it comes to cryptocurrencies, each one has a unique purpose to serve. Therefore, the decision to buy should be based on your specific needs. If your goal is to profit from the ever-changing crypto market, you may want to consider investing in Bitcoin.
However, if you want a cryptocurrency that maintains its price against inflation, then buying stablecoin might be the best preference.
If you choose to invest in Bitcoin, keep in mind that you will likely incur higher transaction fees compared to purchasing stablecoin. Additionally, stablecoins can be easily withdrawn or exchanged for fiat currencies such as USD and Pounds, whereas Bitcoin may not offer the same level of convenience.
With that being said, you should invest in these cryptocurrencies after long research based on your needs.