Top 5 Stablecoins Ranked by Stability

Stack of rocks balanced precariously.

A recent research report published by the leading digital assets exchange Binance reveals that in May 2019, as much as three-fifths (60 percent) of the Quote Asset volume on its exchange was driven by stablecoins, a phenomenal increase of 25 percent year-over-year. One of the main takeaways from the report is that USD-backed stablecoins witnessed increased adoption and trading pair usage when compared to other trading pairs.

Clearly, stable coins have carved out a niche in the crypto-assets market, particularly as a secure hedge against the market’s inherent volatility.

Are Stablecoins Actually Stable?

However, here’s the surprising part. Stablecoins display volatility as well. When compared to other crypto assets, some stable coins are a reliable store of value, which is why they’ve gained so much popularity in the crypto space.

The flood of stablecoins entering the market aptly demonstrates their expanding use cases, from crypto exchanges like Binance testing its own in-house stablecoin (pegged to the British pound) to tech giants like Facebook’s Libra project, a new digital currency fully backed by a reserve of fiat currencies and other assets.

On a quest to find the top five stablecoins by stability, you just have to address the elephant in the room: what constitutes “stability” for a stablecoin?

Exploring Stability as It Relates to Stablecoins

Stablecoins are, by definition, digital currencies that often have their value pegged to an underlying asset like fiat money, scarce metals, or other digital currencies. USD-backed stablecoins are pegged to the dollar in a 1:1 ratio, meaning one stablecoin should equal to $1.

So for comparison purposes, the BMJ team is determining stability based on maximum deviation from a $1 peg. For example, on July 9, USDT traded at a high of $1.02 and a low of $1, so for that day, the deviation of USDT is max (1.02-1, 1-0) or 0.02.

Furthermore, the team took into consideration the top eight stablecoins by market capitalization, namely, Tether ($3.89 billion), USDCoin ($381 million), TrueUSD ($217 million), Paxos ($165 million), DAI ($88 million), STATIS EURS ($35 million), BitUSD ($18 million), and Gemini ($9 million). The time frame for comparison was the three-month period from April 13 to July 13, 2019.

USDT

TUSD

USDC

PAX

DAI

EURS

BITUSD

GUSD

Average daily Deviation

0.01200576923

0.01444872527

0.0116001978

0.01304550549

0.03258708791

0.03255443333

0.6538388791

0.009525824176

Max deviation (3 months)

0.03

0.04

0.04

0.04

0.099777

0.099777

11.63

0.03

Standard Deviation

0.005154711478

0.008413771956

0.005907013882

0.006695042346

0.01754824483

0.01744675595

2.275757473

0.006586370151

Here’s a look at the raw data.

Interestingly, GUSD displayed the least average daily deviation over a three-month period at just $0.0095. The average daily deviation of USDT, TUSD, USDC, PAX was also fairly low, less than $0.014. However, DAI, EURS, and BITUSD displayed the highest average deviation with BITUSD topping the list.

In terms of maximum deviation, BITUSD lost its peg to the dollar and soared more than 10 times to reach $11.6.

The best way to determine stability would be to calculate standard deviation, as it explains how data points in a group stray out from the average or expected value, in this case, $1.

In essence, the most stable stablecoins will have the least deviation from the expected value.

The Top Five Stablecoins by Stability/Deviation

Standard deviation chart.

The top five stablecoins in terms of least standard deviation from the expected value are USDT ( least deviation, $0.0051), followed by, USDC ($0.0059), GUSD ($0.0065), PAX ($0.0066), and finally TUSD ($0.0084).

If you’re looking for a stablecoin that is a reliable store of value, these digital assets may be your best choices.

For more deep dives into the world of bitcoin and altcoin investing, subscribe to the Bitcoin Market Journal newsletter today!

Comments are closed.