Stablecoins are designed to hold the value of a physical asset. They’re not meant to be volatile like Bitcoin or other cryptocurrencies. This way, investors can use them to transfer value while utilizing the benefits of blockchain.
However, some investors might want to make money trading stablecoins. While that might not seem viable at first, it actually is. In this post, we’ll break down just how you can do so.
Table of Contents
Holding
The simplest way to profit by trading stablecoins is by holding them. Take a platform like Gold Exchange, for example. If you invest in their precious-metal-backed Stablecoins, you’re essentially holding gold. The coins’ value will fluctuate based on the price of the physical metal. If you buy low and sell high, you can profit.
This doesn’t work as well for assets like Tether, however, which are tied to the fiat US dollar. That isn’t meant to go up or down in value, which is why precious metal-backed stablecoins are better for profits.
Staking
Staking stablecoins is a fantastic way to make money. Staking is essentially locking in your stablecoins to earn interest on them, similar to holding money in a savings account. It’s a newer concept for sure, but one that most traders are looking to take advantage of.
On top of this, investors can lend out their staked funds for others to borrow. This enables stakers to earn even more in interest. They’ll earn the traditional interest received for staking funds, as well as interest paid out by the borrowers.
Stablecoins are a great incentive for lending and borrowing, as they’re represented by fiat currencies. Users can borrow stablecoins instead of borrowing traditional fiat. They won’t have to go through a bank or other third-party, either.
Arbitrage
Considering there are so many exchanges out there, it takes time for them all to update the price accurately. Some traders paying attention can profit from this.
You can buy stablecoins on one exchange, find a higher price on another platform, and then sell them there. Assuming you sell them in the time frame before the latter updates, you should profit. Traders appreciate this as a quick and easy way to profit.
Day Trading
Depending on the stablecoin you invest in, you can earn from trading daily. Investing in an asset that ties to something more volatile, like platinum, can earn you.
Consider the fact that you’re not paying a ton of extra fees like with traditional trading. While sure, buying and selling stablecoins does cost some trading fees, they’re nowhere near traditional rates. If you buy a volatile stablecoin at a low value, you can then sell it at a high rate. Day trading it will make you even more, assuming you have the time to do so.
Keep in mind that there are various stablecoins you won’t profit from doing this with. Tether and other USD-tied stablecoins are not volatile and will not help you profit from day trading.
Decentralized Finance
There are various stablecoins built on the Ethereum platform. That network is also home to the majority of the largest decentralized finance (DeFi) projects. Many of these allow you to earn money on them while participating with stablecoins.
Spending time researching different stablecoins and seeing which ones will provide you the most profit is a good idea. Pay attention to ones on Ethereum especially, as these are the assets that will likely have the most value. Of course, these are speculative projects, and the industry is new. It’s possible some of these projects could be a scam, so look out for those.
Conclusion
Now you’re aware of some of the ways to profit from stablecoins. While there are surely other ways to do so as well, these are the most prominent.
That said, pay attention to the industry and see which projects are most appealing to you. Assuming you understand how they work and they have a following, you should be able to profit.
