Unlike Bitcoin, USDC is a stablecoin, which gives it different traits that may benefit certain investors.
Stablecoins are a type of cryptocurrency programmed to track the value of other assets, such as government monies or gold.
They are cryptocurrencies backed 1-to-1 by an underlying government fiat currency (US Dollars or Euros) stored in traditional financial institutions. Simply put, stablecoins are a digital version of fiat money and are pegged to that currency.
For example, USD Coin (USDC) is a stablecoin that is pegged to the US Dollar, and as such, the value of one coin is $1.
Rand-Hedge: USDC gives you US Dollar exposure. By holding USDC, you are dodging the effects of rand depreciation and protecting your wealth in the process.
Low volatility: USDC provides a stable dollar-based value, giving it zero volatility against the dollar.
USDC is a good Rand-hedge investment
South Africans have a unique need for US Dollar exposure, the reason being that the South African Rand depreciates against the US Dollar roughly 5% a year … every year.
This means that it’s increasingly challenging for South Africans to accumulate international wealth while saving in a currency that’s making them 5% poorer every year. This is why you may hear the term “rand hedge’ being thrown around in conversations. In essence, this means that you get exposure to an asset that “hedges out” this 5% leak.
If you had taken R1 000 and converted it into US Dollars 10 years ago (earning zero interest), it would be worth R2 100 today, while your Rands would still be worth R1 000. This just shows you how much buying power you would’ve lost over the last 10 years if you chose to hold your wealth in Rands. In fact, you’ve lost out on +7.7% year-on-year and +110% in total; that’s a -52.38% loss in wealth.
Stablecoins can help you stop this wealth erosion and make it work for you, not against you.
By simply taking your hard-earned Rands and converting them into USDC, you are increasing your wealth by +7.7% a year.
Stablecoins, like USDC, are less volatile than other cryptocurrencies
Due to the nature of stablecoins being a digital version of fiat money, they are inherently less volatile compared to your standard cryptocurrencies. In fact, USDC’s volatility is essentially zero, as it tracks the US Dollar. When comparing this lack of volatility to that of Bitcoin, one of the most volatile assets in the world, it becomes quite clear that stablecoins are far less volatile.
For example, USDC’s 90-day volatility against the US Dollar is 0.98%, while Bitcoin’s 90-day volatility against the US Dollar is 94.70%.
It is safe for me to save in USDC?
A relative Fact
- USDC is a stablecoin.
- Its volatility and price risk is negligible.
- USDC tracks and is fully collateralised at 1-to-1 against the US Dollar.
While USDC is safe when compared to any other cryptocurrencies, all cryptocurrencies have inherent risks. But it’s not only crypto — all investments carry risks, and you stand the chance of losing more than you put in. This is what makes the market what it is, however, and produces returns.
Yes, USDC is not insured, but most banks with insurance only cover you up to a certain amount. Remember African Bank? How many people do you think got their money returned to them? The risk of loss issue only comes into play if the exchange you bought the USDC on went out of business. Therefore, you should make sure your exchange is secure and fully collateralised.
At investment platform Revix, you can gain access to USDC and easily add it to your portfolio. Revix is a fully collateralised platform with a greater than 1:1 collateralisation ratio and holds your assets on multiple multi-signature encrypted wallets all around the world. This is done to ensure that your assets are in the safest hand possible.
Revix is offering zero fees buying USDC on the platform for a week; and is also releasing a USDC Flexible DeFi Savings Vault in the coming week.
This is a US Dollars denominated savings account that offers an earning-by-minute interest rate well above market (prior 12 months: 4.33%), and best of all, there’s no lockup period.
So if you’re looking for a Rand hedge and a stable way to grow your wealth, then this is the product for you.
Brought to you by Revix, the simplest, effortless and safest way to invest in crypto.