5 Stable Cryptos to buy when the market turns
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
You can also put your precious SBD´s into your saving accounts. You can get them out again after a three days waiting period. If a hack would happen, your coins would still be save.
Thanks for the tip.
I need to explore that feature a bit as it sounds like it might significantly reduce the risk of holding large amounts of SBD.
Yeah, you can even put Steem Power into saving accounts. But I would rather power up then put it into the savings account..
Excellent post B - we at Community News have resteemed for easy future reference.
However, we are not sure about wanting to hold US dollars or anything pegged to it - as such we are probably more interested in holding bitgold or bitsilver than the others.
CN
Thanks. I know exactly what you mean.
A lot of us are in the crypto space because we want to get out of fiat and the whole unstable financial system, so I do hope that fiat plays no role in our future economies but it will take time for us to completely transition.
What we need is more bitGold type solutions. There are others who offer crypto gold in a similar way to Tether (where they hold gold for you and issue crypto for it 1:1), but they have a similar flaw to the centralised point of (bank) failure. Thinking out loud, if the Corion concept works that would actually be ideal to create a coin with the gold price as a target....
....ohh...did I just come up with an ICO idea?
Great info, resteemed. My favorite is Tether because it has the better stability with 1 USD.
SBD will trade down to 90 cents, or like 80 cents on poloniex. This sort of behavior happens during market declines. This means people buying "stable SBD" could face a 10% to 20% decline in value if they try to rebuy other cryptos when the market is tanking. Once the price of STEEM begins to recover, SBD will trade back up near $1 again, but so long as the market is declining SBD value is not safe due to how the mechanism works for holding SBD prices at $1 USD.
That said, if I am holding Tether USD, and I see SBD trading down to 90 cents or lower, I buy SBD instead, and then when STEEM recovers, you get a free 10% ride higher! SBD at or below $0.90 is quite safe, safer than Tether really. SBD also has little to no risk of their system failing, where as with Tether, it has more of that risk of total failure.
Totally agree.
I'm always refining my strategy, but in this last move to safety I have used Tether as I anticipated the falter of BTC $5K and got out ahead of the downturn. I am thinking that SBD might be a better option when the market is already falling and I am late to exit. In that scenario SBD may already be showing weakness and a bargain can be had (before this latest selloff SBD was over $1 US)
The volume of trade on SBD is a bit low though. According to CMC the turnover on Bittrex is only $46K in the last 24 hours, which is not a lot and it wont take much to move the market there. I wouldn't buy SBD on Poloniex because you can't get it out. Deposits and withdrawals of SBD has been down for a long time now and there's no promise of a fix in sight.
The problem is all these tokens has a single point of failure - the issuer.
Also in case of severe market downturn they un-peg from dollar pretty quickly.
And third - if you don't live in North America or Western Europe, your authorities don't care about your crypto earnings less than $100k.
Yes, I am yet to come across a crypto (or fiat currency) that hasn't got some issues with it. Single point of failure is definitely a risk, but I'd suggest anyone who is playing in the crypto space who isn't comfortable with some level of risk should not be in it.
I'm not suggesting these cryptos for long term holdings, just a means to an end for a particular scenario for a particular short term purpose. If used right then they can do a job.
I'd avoid USDT, bottom could fall out anytime, sbd and bit/usd better options
https://hackernoon.com/the-curious-tale-of-tethers-6b0031eead87
Interesting article, thanks. I've checked out your blog quickly and followed.
Definitely USDT has some risks and I don't like the wording on the terms of service, nor the dependency on any kind of mainstream bank.
Awesome post, I really enjoyed it. I hope you appreciate the vote!
Thanks. I am glad you enjoyed it and thanks for the vote. I'm just getting started on steemit and need all the help I can get :)
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I was trying to think how The Hero fits in here, as it's also a very stable asset. I'm not sure if it's anywhere except Bitshares.org at this point.
I am aware of the Hero and admit it could fit in here, but I am a bit sceptical about its merits.
I don't understand why anyone in their right mind would short USD+5% p.a. when they could just short bitUSD. It strikes me as a bit of a gimmick/marketing trick used to promote bitshares platform to frustrated investors but I don't think it has legs. Just my opinion of course.
Watch out with Tether, there are many reports that it might be in problem. tip!
Hey, thanks for the tip. I wasn't aware of the tipu service.
Great info.. thanks...
You're welcome :)
Very helpful!
Sounds like we need a cold wallet for steem and sbd.