In May 2022, the crypto market faced the collapse of one of the most capitalised crypto projects, Terra, and its stablecoin, UST. This situation caused many in the crypto community to question the reliability of stablecoins. However, the importance of stablecoins to the crypto market compels their use in any case. Crypto market participants need to be more careful in their choice of stablecoins. In this article, we'll list the best and most reliable stablecoins in 2022. 

What is a stablecoin?

Stablecoins are digital assets whose price is pegged to the price of an underlying asset. The underlying asset can be almost anything: fiat currencies, cryptocurrencies, commodities, raw materials. But the most common ones are dollar-based stablecoins because it is in dollars that the value of assets in the crypto market is usually assessed.

Why are stablecoins so important?

Stablecoins are hugely important to the cryptocurrency industry. The main problem with cryptocurrency, which inhibits its adoption, is its high volatility. Many factors contribute to price changes, which is why a cryptocurrency's price can change quickly, significantly and unpredictably. Stablecoins allow you to use the advantages of cryptocurrencies, such as fast and cheap transactions and flexibility in trading but avoid their main disadvantage of excessive volatility. Thus, they are well suited to store and measure value in the cryptocurrency market.

In addition, dollar-pegged stablecoins are very convenient to use in crypto trading. They make it easy to trade cryptocurrencies against the dollar. The main disadvantage of most stablecoins is that they are centralised. This makes them and their users vulnerable to the actions of governments and regulators.

Best stablecoins in 2022

Which stablecoin to choose will largely depend on the purpose you will use it for. Nevertheless, to make the choice easier, we have prepared a list of the best stablecoins in 2022. Also, note that it makes sense to diversify your stablecoin portfolio in many cases instead of using only one of them.

USDC

It's considered by many to be the most reliable stablecoin. USDC is issued by Circle in partnership with cryptocurrency exchange Coinbase. Circle Ltd. is licensed and fully regulated by the New York State Department of Financial Services (NYDFS) to do business in the USA.

USDC is a stablecoin that has high transparency and liquidity. The company publishes monthly publicly available audits to reassure investors that all digital coins are fully secured. On top of that, most major cryptocurrency exchanges accept the coin, which is an ERC-20 token that makes it easy to integrate it into Ethereum-based applications.

The downside of this stablecoin is the centralisation and control of financial flows by Coinbase and Circle, which makes it vulnerable to freezing or confiscation by regulators.

USDC statistics

USDT

The oldest and most popular stablecoin. Almost all cryptocurrency exchanges and wallets support it. Its conversion into fiat money is also no problem: many services allow you to do that.

The main disadvantage is the same as with other fiat-collateralised stablecoins: centralisation. In addition, the company has repeatedly been accused of a lack of transparency and insufficient collateral.

USDT statistics

BUSD

A dollar-backed stablecoin issued by Paxos in partnership with the largest cryptocurrency exchange, Binance. Like the USDC, BUSD is approved and regulated by the New York State Department of Financial Services. Handy for use in crypto trading on Binance. The disadvantage is centralisation.

BUSD statistics

DAI

This stablecoin is issued by the MakerDAO Foundation. The user deposits ETH into the protocol and receives several stablecoins in return, calculated based on the current market price. At any time, it's possible to make a reverse exchange and get your cryptocurrency back.

The token's price is $1 as of 6 July 2022 and remains so regardless of the ETH price. If a deviation from the value set in the smart contract, surplus coins are destroyed, or new coins are issued.

The token is supported by most major cryptocurrency exchanges and is also suitable for trading on decentralised exchanges that work with the ERC-20 standard.

Because DAI is regulated by smart contracts, this stablecoin cannot be confiscated or frozen by regulators. However, DAI is backed by Ethereum, a much more volatile asset than USD, making it more prone to collapse. This makes it riskier for holders compared to centralised stablecoins.

DAI statistics

The best stablecoins in 2021

The list of the best stablecoins in 2022 has not changed much compared to 2021. The most popular, convenient and reliable stablecoins were the same: USDT, USDC and BUSD.

Conclusion

Stablecoins are very important to the crypto industry, serving as a relatively safe means of storing money in the crypto market and bridging the gap between cryptocurrencies and fiat money. However, stablecoins are not without their drawbacks. Also, even fiat currencies to which the most popular stablecoins are pegged are subject to inflation. So it's worth remembering to diversify your assets.