How to save with stablecoin in 2024

With the global inflation rate reaching the highest it has ever been in over two decades in July 2022, stablecoins are becoming an intriguing option for saving. Since the value of these digital coins is pegged to a valuable asset, they can come in handy for people trying to protect their wealth from inflation. But how exactly can you use stablecoins to save and protect finances? Read through this guide to learn how to save with stablecoins to protect your finances from the harsh impact of inflation.   

What are stablecoins?

Before you learn how to save with stablecoin, let’s briefly discuss the meaning of stablecoins and why they matter. As the name implies, stablecoins are a type of digital coin that has lower volatility than regular cryptocurrencies. These tokens can maintain their value and regulate their volatility by being pegged to a valuable asset, such as gold, a fiat currency, or another cryptocurrency.

Essentially, these digital coins get their stability from the real-life asset to which they are tied. For instance, one USDT (tether) is pegged 1:1 to the US Dollar. Other kinds of stablecoins include USD Coin (USDC), Pax Dollar (USD), Binance Dollar (BUSD), Gemini Dollar (GUSD), PayPal USD (PYUSD), etc.  

Stablecoins as a hedge against inflation

Generally, “stronger” fiat currencies, such as the US dollar (USD) are more desirable because they experience relatively low inflation rates. As such, the value of stablecoins is pegged to these “stronger” currencies, which makes them capable of providing a hedge against inflation. With the value of the Nigerian Naira depreciating due to the persistent inflation in the country, stablecoins can serve as a reasonable way to protect your savings. 

Check this out: Top 5 ways crypto can benefit SMEs in Africa

Why are stablecoins important?

Here are a few reasons why stablecoins are invaluable to both crypto investors and people who want to preserve their wealth: 

• Stablecoins hedge against the inflation of fiat currencies.
• They are very easy to invest in and gain interest.
• Due to their nature, they help to reduce volatility.
• You are allowed to send stablecoins internationally. Hence, they are a cheaper and faster option for remittance.
• Investors who want to invest in cryptocurrencies but are concerned about their high volatility can simply invest in stablecoins.

How to save with stablecoin

Learning how to save with stablecoins is very simple. Follow the guide below to start saving in stablecoins: 

1. Choose an authorized and reputable exchange or platform

Start by finding a crypto exchange or platform that aligns with your goals and preferences. The platform you choose should also offer secure storage for stablecoins. Ensure that you research its authorization, reputation, fees, security measures, as well as the available stablecoins to ensure that they align with your expectations. With over 5 stablecoins to choose from, Bitmama is easily the best platform for trading this kind of crypto. Download the app to get started.

2. Create an account on the crypto exchange and verify your identity:

Next, sign up on the Bitmama platform to create an account. You can do this by completing the registration process and providing the required information for your KYC (Know Your Customer) verification. Bitmama needs this information for compliance and security purposes.

3. Fund your account with Naira

Thereafter, fund your fiat wallet with relevant fiat (Naira, Cedis, or Shilling) using any of the accepted payment methods on the exchange platform. 

4. Purchase stablecoins

Choose the stablecoin you would like to buy, such as USDT (Tether), USDC (USD Coin), PayPal USD (PYUSD), or even cUSD among others. These tokens are pegged to the US dollar, which means that they provide you with relative stability.

This article explains better: How to buy crypto from bank account on Bitmama

5. Store your stablecoins securely

Lastly, select a suitable storage option for your stablecoins. Here are some options you have:

• Exchange wallet: Although exchange wallets are very convenient for trading, they are less secure for holding your crypto over a long period.
• Personal wallet: Personal wallets offer you better control and security than exchange wallets, but they require careful management.
• Hardware wallet: Hardware wallets are the most secure option for holding your stablecoins. However, they are less convenient for executing frequent transactions.

Saving in stablecoin vs saving in other kinds of cryptocurrencies

Let’s look at some of the key differences between saving in stablecoins versus saving in other cryptocurrencies. 

1. Investment in stablecoin is not deeply affected by volatility, unlike what happens with regular cryptocurrencies 

Stablecoin investments are not affected by volatility because their value is tied to real-life assets so their volatility has been minimized to the nearest minimum. You can save money in USDT and after years its value is just slightly different.

2. Investing in stablecoin is generally less risky 

It is less risky to invest in stablecoins than in any other kind of cryptocurrencies like Bitcoin and Ethereum. This is because cryptocurrencies are extremely 

volatile, however, this issue has been resolved in the case of stablecoins. Nonetheless, the more the risk involved in a crypto investment, the more potential gains.

3. Stablecoin investments are less demanding

Investing in Bitcoin, Ethereum, and other popular volatile cryptocurrencies is generally more demanding than just investing in stablecoins. Due to the extreme volatility of regular cryptocurrencies, you must understand the market well before you invest.

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4. Stablecoin investments have less mental pressure

Generally, investing in Stablecoin has far less mental pressure on the individual Hodling it than investing money in other kinds of cryptocurrencies.

5. Stablecoins are generally safer  

Stablecoins serve as a safe haven for people trading in other kinds of regular cryptocurrencies during a bear period. So you can invest or save in stablecoins without bothering if the crypto market is a bear one. 

Which stablecoin is safest?

For a stablecoin to be considered safe, certain factors like transparency, regulatory compliance, and auditing practices need to be considered. Because of this, some experts consider stablecoins like USD Coin (USDC), Paypal USD (PYUSD), and Tether (USDT) as safer stablecoins. These coins are said to have the most reasonable level of transparency, regulatory compliance, and auditing practices.

Is it safe to keep money in stablecoins?

Although stablecoins are not prone to the volatility plaguing the crypto market, they are not insured at all, which is a disadvantage. So if something goes wrong, all of your investments will be gone. Also, there’s a risk that the stablecoin issuer may not be capable of maintaining its peg to the asset. Basically, this means that there’s no guarantee that the value of a stablecoin will always be equal to $1.

When used efficiently, stablecoins serve as an effective tool to save money and preserve the value of your savings. Thanks to their less volatile nature, it is possible to buy them and save them, without any fear that they will lose value. Hence, with calculated risk and smart planning, you can use stablecoins to reach your financial destination with your savings secured. Now that you know how to save with stablecoin, it’s time for you to start protecting your wealth by investing in stablecoins. 

Bitmama offers a secure marketplace for crypto enthusiasts. Perform activities like crypto trading, and creating virtual dollar cards for online payment. Get started today by downloading the Bitmama app.