Unstable vs. Stable coins - the main battleground for crypto. Both share in common that they use blockchain technology, but differ fundamentally in ideology. Which should you choose for your quote currency?
Stable coins vs unstable coins?
BTC vs USDT?
ETH/XRP/LTC vs USDT/TUSD/USDC?
...Which type should you use as a quote currency?
This is a question most of our users have when they first start trading. As it turns out, there are benefits and drawbacks to both types.
In traditional markets, such as indexes, currencies or commodities, setting a quote currency is not really much of a contested question. Traders often don’t wonder whether they should trade from Euros, Dollars or Yen. Most just trade with the currency that they own, or the currency that has more liquidity. In traditional markets, any given choice will also be a relatively stable currency. In crypto trading this last characteristic and many more unique features is what sets the coins apart.
In this blog, we will narrow the discussion down to the coins that best represent both types of coins. In one corner of the ring we can find USDT, defending stable coins, and in the opposite one BTC, for unstable coins. Overall, only 12% of Cryptohopper users use stable coins as their quote currencie, but that shouldn't shape your decision. After reading this blog you will have a solid understanding of the pros and cons of each type and a good idea of which type you want to select as your quote currency on Cryptohopper!
BTC- Bitcoin
bitcoin
bitcoin
Background
Bitcoin is the first and definitely the most popular cryptocurrency. It was created by the mysterious Satoshi Nakamoto in 2009 as the first ever electronic, peer-to-peer, decentralized currency.
The latter characteristic has harnessed its reputation as being revolutionary to the pre-existing financial system. Theoretically, if Bitcoin became the leading currency, the world as we know it will be fundamentally different. According to the principals of Bitcoin, power would leave the hands of the centralized figures (such as government institutions and banks) and the world would become more equal as financial control would flow into the hands of the people.
The way that Bitcoin works is that the middlemen that control and regulate the currency is removed and for the first time replaced by a verification system (the blockchain) that can perform many of these duties autonomously. So, if you believe in this ideology, and see eye to eye with Anarcho-captalism, consider selecting Bitcoin. When using Bitcoin as your quote currency be sure to also keep in mind the following differences:
Advantages
BTC high potential. Do you believe a bull run is imminent? In that case, holding BTC might offer the largest returns since, normally, this is the coin that leads the peaks of the crypto market.
More trading pairs. Exchanges often use BTC as the main pivotal point through which the rest of the cryptocurrencies can be traded. While BTC can be traded against more than 100 coins in an exchange, other coins might offer around 25 or none in the case of other altcoins.
Fewer stop-losses. It is well known that BTC often predicts the price direction of other coins. Therefore, in some ways, the crypto market is syncronised with BTC. If BTC drops, the negative percentage of your open positions won’t have varied much and therefore, your positions wouldn’t have been close at a loss.
Disadvantages
Volatility. BTC and crypto in general are characterized by big changes in value. Everything is fine when the prices rise, however, a downtrend in crypto might offset all the gains obtained by your accurate technical analysis.
BTC high potential. As previously stated, holding BTC can give you large returns during uptrends since it often drives the prices of other cryptocurrencies. However, you actually do not want to have any open positions when BTC increases, as this will often turn your open positions into bags as the BTC price far outperforms those of your alt-coins. So, until you've sold every position in your alt-coins and you've gained BTC (that is rising in price) you may be holding onto some bags.
USDT - Tether
tether
Background
USDT or Tether, has been around since 2014 and is known as a stablecoin as it is backed 1:1 by USD. It is issued on the Bitcoin blockchain via the Omni Layer Protocol and is intended to serve as a gateway between fiat and cryptocurrencies. Since it's inception, it has been criticized for being fraudulent. Tether is centralized and managed by the company Tether Limited and became vilified by many cryptocurrency fans after Tether failed to provide the promised audit showing the adequate dollar reserves backing every single Tether token. This means, that in theory, Tether could just be printing money without backing it up. David Gerard of WSJ stated once that Tether "is sort of the central bank of crypto trading...(yet) they don't conduct themselves like you'd expect a responsible, sensible financial institution to do." Overall, the current market cap for USDT is 2 Billion USD, so regardless of the ideology behind it, it has without a doubt become one of the most famous cryptocurrencies. Will you be using it as your quote currency? Here are the key pros and cons:
Advantages
Stability. Forex and stocks trading is usually carried out from a stable coin that generally is a very stable currency such as the Euro, Dollar or Yen. As a result, it is possible to pinpoint changes in the value of the asset that is being traded. Trading from a coin that is volatile might make the TA harder to apply. Due to this, USDT and it's stability can be a very good solution to trade according to your strategy.
They preserve their value during downtrends. When the bear market hit in 2018, holding any kind of unstable coin might have lost you some serious value. However, USDT stayed safe from the slaughter since it is backed by real dollars.
Disadvantages
Fewer pairs to trade with. USDT cannot be directly exchanged for most of the coins. It usually allows you to trade with 18 to 24 different pairs, which in exchanges with more than 150 coins might fall short
Owned by a company. Some traders don’t really trust USDT since it isn’t decentralized and is owned by a company that promises a real dollar per USDT. They wonder if Tether actually has enough resources to comply with their promises. Moreover, if you're an idealist trader, and you fundamentally believe in decentralization, then USDT might stand against your values.
Made your decision? Here's how to apply it to Cryptohopper
In order to select your quote currency, head over to the Base config on Cryptohopper, and under coins and amounts, select Quote currency. There you can choose all of the base coins that are available on your given exchange. Using the above pros and cons, pinpoint which currency you want to be building up. Then ensure that the majority of your cryptocurrencies you own in this amount. Your hopper will then actively trade against it with the goal of building it up.
Happy Hopping!
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