USD Coin, known by its ticker USDC, is a stablecoin that runs on the Ethereum, Stellar, Algorand, and Solana blockchains. Its aim is to provide a currency for the digital age and it has seen a surge in popularity – more than $1 billion of USDC were issued in the first year alone – making it the fastest-growing stablecoin in the world. As well as offering security for cryptocurrency traders, its stability has the potential to revolutionise the DeFi industry.
Continue reading to find out more about how the crypto works and whether it’s a good investment in 2021. We also list the best brokers and exchanges offering trading on USD Coin.
USD Coin Explained
USD Coin was launched in September 2018 and was developed by Centre Consortium, a joint venture by peer-to-peer payment services company Circle and cryptocurrency exchange Coinbase. The goal of the founders was to create an ecosystem in which USDC is accepted by as many wallets, exchanges and service providers as possible.
As a stablecoin, USD Coin is tied to the U.S. Dollar and redeemable on a 1:1 basis. It is issued by regulated financial institutions and backed by fully reserved assets which are audited by Grant Thornton, LLP.
In recent years, USD Coin has seen an explosion in popularity due to the rise of decentralised finance and driven by the currency’s guarantee that users can withdraw 1 USDC and receive $1 in return. USD Coins are ERC-20 tokens, found on the Ethereum blockchain, which means the currency can easily be integrated with any Ether-based application.
Major accounting firm, Grant Thornton, LLP, verifies the amount of cash that is held in reserve and ensures this matches up with the number of tokens in circulation. They issue reports on those holdings every month. Furthermore, Centre and Coinbase are well-funded and regulated organisations which gives the future USD Coin an element of certainty other digital currencies lack.
In March of 2021, Visa announced that it would begin using USDC to carry out transactions on its payment network.
Similar projects to USD Coin include Tether (USDT), TrueUSD (TUSD), Gemini Dollar (GUSD), Paxos Standard Token (PAX) and Dai (DAI), which are all ERC-20 stablecoins pegged to the U.S. Dollar.
How Does USD Coin Work?
Circle guarantees that every USD Coin is backed with a U.S. Dollar in a process which is known as tokenisation. This is a simple, three-step process:
A user deposits cash to the token issuer’s bank account
The issuer uses a USD Coin smart contract to create an equivalent amount of USD Coin
The deposited cash is held in reserve, while the user receives a newly minted USD Coin. This ensures there is always 1 USD held for every USD Coin, which gives it its stability
Redeeming your USD Coin for fiat cash is just as straightforward:
Firstly, a user sends a request to redeem their USDC for USD
The issuer again uses the USDC smart contract to exchange the tokens for USD and takes the equivalent amount of tokens out of circulation
The user’s bank account is then deposited with the requested amount of USD directly from the reserves. The user will receive the equivalent amount of USD Coin requested, minus any fees that have been incurred
Benefits Of Trading USD Coin
Stability – Centre’s pioneering technology for fiat-backed stablecoins brings stability to cryptocurrency trading. Confidence and security in USDC are delivered by proving that U.S. dollars are being held in reserve. In a market renowned for its extreme volatility, traders can be reassured knowing that in holding USDC, you are in possession of a fiat-backed currency that is regularly audited.
Accessibility – Holding USD Coin, unlike regular U.S. dollars, does not require a bank account and it doesn’t matter where you live. All you need is a mobile phone and you can send USD Coin around the world in seconds. Furthermore, as the crypto market is open for trading 24 hours a day, 365 days a year, it is possible to trade USD Coin with other cryptos while other major markets are closed for business.
Leverage – One of the ways to maximise profits as a day trader is to use margin trading. Many brokers offer a range of leverage options on USD Coin which can increase exposure for greater gains. However, using multipliers increases risk and therefore potential losses and should be used responsibly.
Liquidity – Another advantage of USD Coin being tied to the U.S. Dollar is its high liquidity. Unlike other cryptocurrencies, withdrawals at a rate of 1:1 to the U.S Dollar can be carried out with ease. High volumes also suit multiple trading strategies.
Like other cryptocurrencies, it is possible to mine USD Coin. However, these days it is important to research whether or not your setup will be capable of generating any profit. GPU miners use an incredible amount of electricity and can often result in losses rather than gains. The most efficient way to mine is by using an ASIC setup, however this hardware has become expensive – usually several thousand dollars for a decent setup.
Mining profitability calculators are a good way to find out what hardware is capable of generating profits and can easily be found online.
How To Buy & Store USD Coin
Coinbase, one of the most renowned crypto brokers on the market, was a founding partner of USD Coin so it is no surprise they are one of the most enthusiastic proponents of the currency. Coinbase users in the U.S.A (excluding residents of Hawaii) are eligible for monthly rewards earned for the days in which you have a balance of at least $1 of USDC on Coinbase. The higher the balance, the more rewards you earn.
However, Coinbase is not the only exchange where users can buy and trade USDC. The currency is now widely supported on popular platforms such as Binance (paired with BTC, BNB) and Poloniex (paired with BTC, ETH, XRP, BHC, STR, LTC, ZEC, XMR, DOGE).
Whether you decide to buy, sell or mine USD Coin, you will need to have somewhere to store it. As mentioned earlier, USDC follows the ERC-20 standard and can therefore be used with any app that supports the Ethereum blockchain. This means that digital assets can now be bought and traded using a stable digital dollar on any platform that supports the ERC-20 standard.
The three most popular types of ERC-20 wallets used today are hardware wallets, software wallets, and exchange wallets:
Exchange wallets are by far the easiest setup but offer the least security. Most crypto exchanges and brokers offer their own in-built wallet service and require some basic KYC checks.
A hardware wallet is the most secure option for storing your crypto. You will need to purchase one and connect it to your PC via a cable provided. Then follow the manufacturer’s installation instructions and enter your PIN code and recovery phrase. Make sure to keep these written down in the event of loss, theft or forgetfulness.
Software wallets come in desktop, mobile and online variants and are the happy medium between security and convenience.
Choosing An Exchange
When deciding which crypto broker to go for there are a number of factors to consider:
Fees – Charges vary drastically from broker to broker and can take many forms such as commission, overnight fees or percentage cuts of earnings. Research is key to finding a broker with attractive fees.
Leverage – Different platforms offer a range of leverage options for USD Coin. High leverage options are an enticing route to maximising profits when trading, but can also result in higher losses. Go for a broker that offers low-interest rates when trading with leverage.
Accounts – Most platforms offer a tiered account system in which different features and rewards are available on each level. Although the cheapest option might seem the most appealing, more advanced options may increase profit in the long term. Good advice is to look for brokers who offer customisability, competitive spreads, and straightforward withdrawals.
Customer service – The cryptocurrency market is booming and brokers are expanding at an extraordinary rate to meet the needs of their customers. With trading open 24/7 and markets being highly volatile, it is important to find a broker with around the clock customer service provisions. Many brokers offer a live chat helpline and phone support, however responsiveness and waiting times vary. Check out customer service reviews online when considering a broker to trade USD Coin.
Regulation – Your options as a trader vary depending on where in the world you are. Regulation of cryptocurrency trading is different in every country, so make sure you know what the limits are where you live. In the UK for example, as of January 2021, regulatory changes prohibit speculation on crypto prices via leveraged products such as CFDs.
USD Coin is proving popular amongst crypto traders because of the level of trust, speed, and ease to move in and out of trades it provides. Check out our list of trading tips to help you start making moves:
Keep up to date – The crypto market is extremely volatile and never closes, therefore keeping up to date with the latest trends and developments is vital. Most brokers offer tutorials, blog posts and demo accounts that can be used to hone your skills.
Research – There are numerous websites and blogs which provide current insights and analysis. YouTube, for example, contains hundreds of free tutorials. Furthermore, many traders now turn to Reddit forums to share tips and hints with fellow traders.
Technical analysis – Most brokers provide several features to help with market analysis. It is important to get to grips with charts and indicators to ensure you are maximising your profits. Line, bar and candlestick charts are common and offer the most amount of information in an easy-to-digest format.
Money management – It is impossible to predict what will happen in any market, therefore a good money management strategy is important when you start trading. Beginners should never invest more than they are willing to use. Effective money management can cut your losses when you make a mistake and increase gains when you get it right.
USD Coin is a highly stable digital currency, which gives it a level of certainty uncommon among other cryptos. Whether you use USD, GBP, INR or NZD to buy USD Coin, each currency will be redeemable for 1 U.S. Dollar.
Keep an eye on inflation rates and whether you’re looking at the rest of 2021, 2025 or 2030, you should be able to get an idea of where USD Coin is headed.
Final Word On Trading USD Coin
Stablecoins have the potential to shake up the world of digital assets by allowing investors to move quickly in and out of risky trades and by making exchange arbitrage seamless. USD Coin holds advantages over other stablecoins, such as Tether (USDT), in that it is issued by a body regulated by financial institutions and its reserve holdings are audited on a monthly basis.
Investors looking for a safe and reliable digital currency to start trading need to look no further than USD Coin.