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In today's issue: Stablecoins have emerged as one of the most important use cases for crypto. Politicians asking whether people want a "digital dollar" are missing the obvious: over $135 billion is already being held in digital dollars.
But what about other currencies?
Enter the euro stablecoin, which is pegged to the euro instead of USD. Although this market is still small compared to dollar-pegged stablecoins, we predict it will continue to rise with the European adoption of web3.
For investors who want euro exposure, swapping your dollar-pegged stablecoins for euro stablecoins is as easy as Uniswapping.
For our list of the highest-quality euro stablecoins to date, read on. |
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| Best Euro Stablecoins, Rated and Reviewed by Ben Burn |
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When you think of stablecoins, what's the first one that springs to mind? Chances are it's one pegged to USD. After all, USD stablecoins account for over 99% of the total stablecoin market capitalization.
Technically, however, the price of a stablecoin can be fixed to the price of just about any asset. That asset could be a fiat currency, a commodity like oil or gold, or even another cryptocurrency.
Euro-based stablecoins are a relatively new variety of these digital assets. This article reviews the best "Eurocoins" and suggests how and why crypto investors might consider including them in their portfolios.
Top Euro-Based Stablecoins |
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Top 4 EUR Stablecoins by Size
Here's how the top four ranked EUR stablecoins stack up against each other in terms of market capitalization: |
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Why Do We Need Euro-Backed Stablecoins?
If you want to protect yourself against crypto market volatility without exiting the crypto market, you need stablecoins. They let you move your crypto funds into a digital asset instead of cashing out into fiat.
The question is which stablecoin to choose. The majority of your options are pegged to USD.
If you want the price stability of a fiat currency but don't want it from the US dollar, the euro is a great choice.
With euro-backed stablecoins, you can get the price stability of fiat euros with the flexibility of crypto.
The Case for Euro-Backed Stablecoins
If you think in terms of euros when you invest or do business, you're not alone.
For people around the world, the euro is the "second most important currency in the international monetary system" according to the European Central Bank. As of the end of 2021, 20% of global foreign exchange holdings and just under 40% of global currency transactions were in euros.
The market capitalization of stablecoins pegged to the world's most important currency (the US dollar) is over $150 billion as of this writing. Therefore, it's natural to expect proportionate market demand for stablecoins pegged to the world's second most important currency.
Watch for EUR stablecoins to account for a more significant piece of the stablecoin pie as time goes on. |
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How Do You Make Money with Euro-Based Stablecoins?
With EUR stablecoins, you can earn money in more stable ways than trading or mining unpegged crypto assets. For example:
Staking. This means locking up your euro stablecoins as or with a network validator and earning a cut of the fees charged for network validation (click here for our list of top staking yields).
Lending. You can get some truly great yields from borrowers, many of whom are betting that an unpegged crypto asset like bitcoin will rise in value vs. the euro (click here for our list of top crypto lending platforms).
Yield farming. You can put your EUR stablecoins into liquidity pools for automated market makers on crypto exchanges in return for high-yield interest rates (click here for our list of Best Yield Farming Rates).
How Price-Stable Are Euro-Based Stablecoins?
Euro-based stablecoins are designed to be pegged to the euro and tend to do a good job of it. Even so, their prices can fluctuate a few cents above and below the 1 EUR mark.
These fluctuations occur as the stablecoin issuers manage supply on the market to keep the peg.
It's possible a EUR stablecoin could lose its peg as the TerraUSD (UST) notoriously did. To avoid getting burned in such a crash, it's worth spending a few minutes investigating how a EUR stablecoin is backed.
Euro stablecoins backed 1:1 by fiat euros ("fully backed" or "reserve backed" stablecoins) are generally the safest, as you know there's "money in the bank" if all stablecoin holders want to redeem all their holdings at once.
Euro stablecoins backed by algorithms ("algorithmic stablecoins") are generally the riskiest, as these rely on complicated math to manage supply and demand. Such math can fail during periods of strong human emotion.
Euro stablecoins backed by other cryptocurrencies are somewhere in between. They're better than nothing, but not as good as fiat backed. If the entire crypto market plummets and everyone wants to withdraw, the stablecoin could go bust.
In the table above, we've indicated how each of these euro-based stablecoins are backed, how the backing is verified, and when the last verifications took place.
All stablecoins carry some degree of risk, so always do your due diligence, and don't invest more than you're willing to lose. |
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| | | Not a Meme This is real, not meme-orex. |
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| Zero-euro banknotes (worth nothing) are available as souvenirs. (They still cost money, though.) |
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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by John Hargrave, Nick Marinoff, Steve Walters, Anatol Antonovici, Ben Burn, Danielle Greving, Preetam Kaushik, and Daniel Joel.
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