How To Make Money With Stablecoins

With proper strategy and knowledge, stablecoins can serve as a stable source of passive income generation. But in what ways can you make this happen?

This guide will explore stablecoins and ways to earn from them. We’ll review a range of income-generating strategies so you can find the one that works best for you.

What Is A Stablecoin?

Before discussing how to get supplemental income using stablecoins, we must first define their meaning. A stablecoin is a type of cryptocurrency designed to keep a stable value relative to a specific asset, typically a fiat currency. What makes stablecoins unique is their capacity to combine the reliability of fiat currencies with the advantages offered by blockchain.

This stability is reached through several mechanisms, categorizing stablecoins into these primary categories:

• Fiat-Collateralized
• Crypto-Collateralized
• Algorithmic or Non-Collateralized

You can read more about them in this article.

Ways to Make Money With Stablecoins

As you may have guessed, stablecoins present various ways to generate profits. Let’s review these approaches to find the one that works for you!

Staking (Lending)

While investigating profit opportunities in cryptocurrency, staking often appears as the primary tactic. In this process, you lock your coins for a specified timeframe to earn rewards. However, because stablecoins lack a Proof of Stake mechanism, they cannot be staked traditionally. However, you can generate interest by lending them out.

Stablecoin lending is a process that enables investors to lend stablecoins to borrowers, receiving interest payments in return. Similar to conventional banking systems where deposits earn interest, stablecoin lending mainly occurs through DeFi protocols. These platforms use smart contracts to conduct lending without intermediaries. You can lend various cryptocurrencies like USDT, USDC, DAI, and BUSD. This can be an excellent method for earning additional tokens with relatively low risk, particularly when compared to lending unstable cryptocurrencies.

Stablecoin lending works like this:

• Pick a Lending Platform: There are numerous options available, so it's important to look at interest rates and terms for comparison.
• Deposit Your Stablecoins: Your deposited coins will be combined with those of other users and provided as loans to borrowers.
• Earn Interest: The earned interest can be paid out in either the same stablecoin or other digital currencies. It will depend on the platform, stablecoin demand, and the borrower's creditworthiness.

For example, you can stake DAI and USDT using Cryptomus. The expected annual ROI is 3%. The process is very simple.

1. Go to the Staking tab in your Personal wallet.

2. Select the cryptocurrency you want to stake and click "Stake now".

3. Enter the amount you wish to stake and click "Confirm".

That’s it! Your first rewards will be distributed within 72 hours.

Liquidity Pools

Stablecoin liquidity pools are options when coins are locked in decentralized exchanges to support trading and maintain liquidity. These pools promote stablecoin trading with minimal price changes, thanks to the stability of the assets involved. Joining liquidity pools enables you to receive rewards from fees and interest. For instance, you can lock your USDT tokens and earn interest on Cryptomus. Generally, the allocation of fees corresponds to the liquidity you provide.

This choice offers a profitable opportunity for those looking for higher returns with minimal risk. Additionally, these pools are essential to DeFi, supporting activities like lending, borrowing, and yield farming. Here’s how it functions:

• Pick a DEX: Your options supporting stablecoin pairs are Uniswap and SushiSwap.
• Deposit Your Crypto: When making a deposit, ensure that you provide an equal amount in stablecoins - alongside another cryptocurrency. For example, a $200 deposit in USDC also needs $200 in another crypto, like ETH.
• Start Earning: Every trade within the pool generates a small fee, enabling you to earn a share of these fees relative to your contribution.

Although providing liquidity can yield profits, it's crucial to understand impermanent loss, which happens when the value of tokens in the pool fluctuates in relation to one another.

P2P Arbitrage

P2P arbitrage is a trading technique that exploits price differences for stablecoins between multiple exchanges or platforms. For instance, imagine USDT available for $1.01 on one exchange and for $0.99 on another, so you just need to buy low and sell high to make a profit from the difference.

You can participate in P2P arbitrage by doing this:

• Monitor Price Discrepancies: Utilize price tracking tools or arbitrage bots to track prices across different exchanges in real time.
• Quickly Execute Trades: When you notice a profitable price difference, act fast to execute your trades, as timing is vital since such opportunities can vanish quickly.
• Factor in Fees: Be aware that trading fees can impact profits, so ensure the price difference surpasses these costs.

To succeed in P2P arbitrage, you must make swift decisions, closely monitor market trends, and comprehend transaction fees to optimize earnings. It should also be quite risky to become such a stablecoin trader.

With the knowledge of numerous income-generating strategies for stablecoins’ trading, it's essential to do your research. Understand the risks involved and choose platforms that match your financial goals as you explore these methods.

Hopefully, our guide was helpful. Send in your experiences and questions below!