Stablecoins are said to be the best product-market fit of all the cryptocurrency innovations. Let’s unpack why that is.

First off, what is a stablecoin, and what value does it serve?

‍Stablecoins are cryptocurrencies generally backed 1-to-1 by an underlying government fiat currency (e.g. US dollars or Euros) stored in a traditional financial institution. Simply put, stablecoins are a digital version of fiat money pegged to a specific currency. For example, USD Coin (USDC) is a stablecoin pegged to the US dollar, and as such, you can redeem 1 USD Coin for 1 US dollar.

Before the advent of stablecoins, Bitcoin was the major medium of exchange used for crypto payments and settlements inside of exchanges. This made payments and trading quite difficult because of Bitcoin's volatile nature compared to the US dollar. Imagine trying to pay someone $100 using Bitcoin? By the time the Bitcoin gets to them, the value of the Bitcoin could be $90 or $110. Stablecoins have solved this problem and offer a far superior means of payment.

Why should I own USDC?

Firstly any investor will tell you that holding some cash at all times is prudent, not only for your emergency expenses but for your investment portfolio too. So that when great buying opportunities arise, you will have cash on hand to take advantage of them.

Secondly, USDC is a hedge against a weakening rand, giving you US dollar exposure. By holding USDC, you are avoiding the effects of rand depreciation and protecting your wealth in the process. The rand has lost -49.33% of its value against the dollar over the last 10 years, that is an effective -6.57% per year.

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We all know by now that inflation is becoming more and more of a problem. Prices of goods and services just keep on rising, so much so that inflation in South Africa is at its highest level since 2008 at 7.4%. Meanwhile, in the US, inflation is also out of hand, sitting at 8.5%, some of the highest levels in 40 years!

Savvy investors know that if you’re not earning a return higher than inflation, you’re losing money or rather, your money is losing purchasing power, meaning your money buys you less over time. 

Our team at Altify knows this and decided to work to make sure we can offer the perfect savings vault to our investors. The perfect place to earn inflation-beating returns on your USDC.

Is it safe for me to save my money in USDC? 

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Let’s assess the facts here, USDC is a stablecoin that tracks and is fully collateralised at 1-to-1 by the US dollar. Its volatility and price risk is incredibly low, making it the ideal ‘cash’ every portfolio needs. We have all heard the saying that “cash is king”, so why not earn some interest on your cash too? 

“I hold a lot of my savings in USDC for two simple reasons. Firstly the rand constantly loses value against the dollar, and secondly, the interest rate I can earn on USDC is higher than anything a bank will offer me so it’s an easy decision.” - Chris Beamish, Investment Analyst at Altify.

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What sets Altify’s USD Savings Vault above the rest?

With the USD Savings Vault, you can earn double the rate that many South African banks are currently offering. The minimum deposit amount is as low as $100 (approximately R1 654 at the time of writing) worth of USD Coin, a 1:1 dollar-backed stablecoin. Adding to that, Altify is currently running a promotion where customers can buy USD Coin without having to pay transaction fees up to the 15th of September 2022. That’s right, Fee-free USD Coin on Altify!

A USD-based savings vault makes it possible to effectively convert your savings to US Dollars while earning a 9.25% return.

In this way, you’re avoiding the depreciation that you would suffer due to holding rands (the one-year rand depreciation rate against the US dollar is 14.68% at the time of writing).

With a return of 9.25% on the balance of your Savings Vault, taking rand depreciation into account translates into a much higher return on your South African rands. If you compare this to the best rate offered by Banks (4.75% in rands) and assume you save your money there for a year, you will have lost 2.46% in real returns. Making the deals that banks offer look incredibly unattractive.