If you are trading forex or CFDs, most brokerages offer quite similar rates due to the competitive industry. Just make sure you pick a broker which is regulated by an established regulator, such as:
UK Financial Conduct Authority (FCA)
Australian Securities and Investment Commission (ASIC)
Monetary Authority of Singapore (MAS)
I am currently using SamTradeFX (ASIC-regulated) for its wide range of products.
If you are based in the US, you can also use Interactive Brokers for forex and CFD trading, but I find it slightly less user-friendly.
Stocks, Stock Indices, ETFs, REITs
If you are looking to buy stocks/ETFs/REITs from around the world, or trade individual stocks actively, then I would recommend Interactive Brokers for its low commissions. If you are outside the US, you can also consider Saxo Markets.
If you are looking to buy or trade stocks/ETFs/REITs in the Singapore stock market only, then I would suggest Tiger Brokers or Moomoo.
If you are looking to trade stock indices for the short or medium-term, then I would suggest SamTradeFX to trade stock index CFDs.
If you don’t mind buying cryptocurrencies indirectly, you can buy crypto trusts or ETFs using Interactive Brokers or Saxo Markets for long-term investment.
If you are looking to trade the main cryptocurrencies to capture short or medium-term moves, then I would suggest SamTradeFX to trade crypto CFDs.
Stablecoins are non-volatile digital assets (cryptocurrencies) that are pegged to an external, real-world asset.
Because they are designed to have a consistent value, in theory they allow for a risk-free investment.
By solving one of cryptocurrency’s biggest issues (volatility), stablecoins give retail investors more confidence to invest in cryptocurrencies.
In this blog post, I will go over what stablecoins are, why they are popular, the top four stablecoins to invest in, and the risks associated with this digital currency.
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What are Stablecoins, and How Do They Solve the Problem of Volatility?
As previously mentioned, stablecoin is a non-volatile cryptocurrency that can reduce the risk of loss for crypto traders to a great extent.
But, considering that stablecoin is a cryptocurrency, how can it be non-volatile?
Here’s your answer:
Stablecoins are pegged to fiat currencies or any other real-world asset.
In other words, they are tied to a government-issued currency that we use every day, like the U.S. Dollar ($).
If a stablecoin is backed by U.S. dollars in a 1:1 ratio, it means that one single-currency stablecoin equals $1 in cash or cash equivalents and very short-term government securities.
Because it is backed by a fiat currency, the value of this digital currency remains constant—hence the word “stable” coin.
With stablecoins, crypto users do not need to be concerned about the value of their investment plummeting at any time.
Real-world assets serve as collateral for stablecoins—for every stablecoin in circulation, an asset is saved in reserve.
The reserve is overseen by an independent custodian, who is audited on a regular basis to prevent any fraud.
This is what makes stablecoins the most reliable and secure cryptocurrency out there.
For now, we cannot directly use stablecoins for our daily transactions because they are not yet an acceptable mode of payment and are not exactly widely popular.
To ensure safety and prevent financial losses, crypto traders can only buy stablecoins with other cryptocurrencies at the time.
Types of Stablecoins
It is also worth noting that not all stablecoins are pegged to fiat currencies. There are some that are backed by other real-world assets.
1. Metal-backed Stablecoins
Some stablecoins are backed by precious metals such as gold and silver.
The value of the stablecoin is determined by the value of the metal—one stablecoin token equals one gram of gold. Just like fiat-backed stablecoins, there are reserves for precious metal-backed stablecoins as well.
The most common precious metal-backed stablecoins are Digix Global (DGX), Tether Gold (XAUT), and PAX Gold (PAXG).
2. Cryptocurrency-backed Stablecoins
Then, there are cryptocurrency-backed stablecoins. In this case, the problem of volatility is addressed by the over-collateralisation of reserves.
The stablecoin to cryptocurrency ratio is 1:3. In other words, the amount of cryptocurrency reserved is three times the amount of stablecoins—so for every $1 of stablecoins, there are $3 worth of crypto in the reserves.
3. Algorithmic Stablecoins
Finally, there are algorithmic stablecoins that are not backed by any collateral. Instead, their price is determined by an algorithm that controls the supply of stablecoins.
This is how it works: when an increasing number of people are buying a lot of stablecoins, the value of the coins shoots up.
When this happens, the algorithm limits the supply of coins, causing the value to revert to its original level.
The same thing happens when the demand for stablecoins goes down, and its prices fall.
What Attracts Crypto Traders to Stablecoins?
Stablecoins have a number of advantages in addition to having a fixed value and offering stability.
To begin with, because stablecoins are a component of decentralised finance (DeFi), no intermediary financial institution is involved in stablecoin transactions. The traders can communicate directly without interference from a third party.
This also means that you will not be charged a third-party fee for the services you are using. However, you must still pay a small fee to use the blockchain network.
These blockchain networks are public ledgers that record all stablecoin transactions for public audit and inspection. This provides greater transparency, which is valued by all traders.
Most importantly, the transactions are straightforward, fast, and are not limited by geographical boundaries.
The Best Stablecoins to Invest In
Currently, there are around 200 stablecoins available around the world, some of which have already been released or are in development. Of those that are released, some show more promise than others.
Here are the four best stablecoins to invest in currently:
1.Tether (USDT)
Tether is a fiat-collateralised, blockchain-based stablecoin that is widely regarded as the most secure stablecoin to invest in.
It is pegged to the U.S. dollar at a 1:1 ratio—meaning 1 USDT equals $1.
Tether was originally known as RealCoin when it was introduced in 2014. It was later renamed Tether.
Today, Tether has become a major source of liquidity for the crypto market.
Crypto traders can buy Tether tokens on well-known cryptocurrency exchanges like Binance, OKEx, Huobi Global, and BitWell.
2. USD Coin (USDC)
USD Coin — like Tether — is pegged to the U.S. dollar at a 1:1 ratio.
All the USDCs in circulation today are ERC-20 tokens, which can be found on the popular cryptocurrency and blockchain system, Ethereum.
Coinbase and Circle collaborated to create USDC. While Coinbase is a well-known crypto exchange platform, Circle is a Boston-based peer-to-peer payments technology company.
USDC is a safe investment option because it is regulated by the United States Financial Crimes Enforcement Network (FinCEN).
Because FinCEN fiercely opposes money laundering, there is little to no risk of fraudulent activity when trading USDC.
Furthermore, the USDC reserves are audited monthly by Grant Thornton LLP, one of the world’s largest accounting networks.
The audit reports are also available on the Circle website for public viewing.
3. Binance USD (BUSD)
Binance USD is also a fiat-backed stablecoin that is pegged to the U.S. dollar at a 1:1 ratio.
It was founded by Paxos and Binance. Paxos is a New York-based financial institution and technology company specialising in blockchain, whereas Binance is a Cayman Islands-domiciled cryptocurrency exchange.
The BUSD stablecoin is approved and regulated by the New York State Department of Financial Services. It is known for making transactions accessible, flexible, and quick.
4. Dai (DAI)
DAI is another popular stablecoin that is an ERC-20 token.
It is known for being completely decentralised, as it is not backed by any external assets controlled by certain central authorities.
Unlike all other stablecoins, DAI is backed by a number of cryptocurrencies rather than just one.
By locking multiple cryptocurrencies in smart contracts, it maintains a 1:1 ratio with the U.S. dollar.
DAI is a ‘stable’ trading option for users in nations with high economic instability.
For such traders, this stablecoin provides a means of financial inclusion.
Disadvantages of Stablecoins
Although stablecoins were created to solve the problem of volatility, it also has some inherent issues.
1. Absence of Decentralisation
The absence of decentralisation is the most serious issue with stablecoins.
Stablecoins, unlike all decentralised cryptocurrencies, are owned by a single entity—in other words, centralised.
For example, the most popular stablecoin, Tether (USDT), is issued by Tether Limited.
The company has complete control over the supply and distribution of USDT.
If the company fails in the future, the value of USDT will suffer greatly as a result. It would be a huge financial loss for investors.
2. Lack of Transparency
Another primary disadvantage of stablecoins is their lack of transparency.
People buy stablecoins with the expectation that the owners have a reserve with a real-world asset for each stablecoin.
However, there is no guarantee that the fiat currency is locked in an actual safe.
Tether Limited is a good case in point. In 2018, the company was fined for failing to show reserves against which the USDT was pegged.
As a result, the value of USDT plummeted… albeit briefly.
3. Underlying Assets Might be Volatile
Ultimately, stablecoins are pegged to fiat currency, or some underlying asset.
This means they are subject to the same volatility of the underlying assets, and can be directly influenced by economic downturns, inflation, and black swan events.
Though they are pegged to high-value currencies—such as the U.S. dollar—and a sudden crash is highly unlikely, it is not entirely impossible.
Therefore, we can conclude that stablecoins are only as stable as the external assets that they are backed by.
Are Stablecoins a Good Investment?
Unfortunately, there is no such thing as a “risk-free” investment in the crypto world.
Before you invest your money in an entirely new digital financial system, you must take a leap of faith.
Although the advent of stablecoins have been heralded as an innovation in the crypto market, I would not go as far to say that they are completely risk-free.
Personally, when I invest in cryptocurrencies, I do so because I am looking for capital appreciation, so I feel that investing in a coin pegged to another asset is not very useful, because I might as well invest in that asset directly without the additional hassle and risk of the stablecoin.
If you are moving a lot of funds through crypto exchanges, then using stablecoins will be a good way to minimise transaction costs, while reducing volatility of your crypto assets during the transition.
Also, for people living in countries with unstable currencies (that are depreciating), then stablecoins might be a good way to store their cash to preserve its value.
Now that I have shared all about stablecoins and its pros and cons, what do you think of it? Do you think they are a good investment?
https://synapsetrading.com/wp-content/uploads/2021/08/stablecoins.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2021-08-06 06:00:372022-12-19 02:15:34What are the Best Stablecoins and are they a Good Crypto Investment?
Decentralized Finance (or “DeFi”) is a new global financial system that allows people to access financial services without the intervention of financial institutions such as banks.
It is a robust financial system that aims to set people free from their reliance on banks, credit unions, and insurance companies as there is no transparency in the operations of these institutions.
In this post, I will go over decentralised finance (DeFi) in detail to help you understand how it works and whether it has the potential to replace our traditional financial system.
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Understanding Centralised Finance and Its Flaws
We currently rely on a centralised financial system (or “CeFi”) in which power is concentrated in the hands of a few central authorities.
These authorities have complete control over all financial institutions, and the people are at their mercy for investment, lending, borrowing, and a myriad of other day-to-day financial services.
When people deposit money into their bank accounts, it is these financial institutions that assume responsibility for it.
The authorities set the standards and ensure that everyone follows them.
For this reason, CeFi is regarded as the most reliable and secure financial system.
That being said, this centralised system is not without flaws—in fact, the system is riddled with them.
Let’s take a closer look at two of the major drawbacks of CeFi.
1. Lack of Transparency
The first drawback of CeFi is a lack of transparency in its financial procedures.
When you deposit your money in a bank, it is never locked away in a bank account that only you have access to.
Instead, your money is handed to another person in need; otherwise, how do you imagine banks lend money?
They take your money and are responsible for ensuring that the borrower repays it.
Even though the bank returns your money if the borrower defaults on the loan, you never know what is happening with your money or to whom it is lent.
2. Data Breaches
In addition to lack of transparency, CeFi is also prone to data breaches.
There have been multiple occasions in the past where a person’s confidential information and money were stolen.
Not only that, but the centralised financial system is vulnerable to financial crises—we are all familiar with past economic downturns that rattled the financial system as a whole.
These are two main concerns in the centralised financial system that everyone should be aware of.
Decentralised finance (DeFi) is now regarded as a panacea for such financial maladies.
Understanding Decentralised Finance (DeFi) and Its Features
A decentralised financial system, as previously mentioned, is an alternative to a centralised financial system.
It enables financial transactions to take place without the involvement of a third-party financial institution.
It is a digital ecosystem of financial services similar to those provided by a traditional centralised financial system. All financial services in this digital ecosystem are risk-free and automated since they are handled by a “code” rather than a human.
The distinction between DeFi and CeFi is that the services of the former are developed on top of a blockchain network. Now, blockchain refers to a decentralised, distributed and often public digital ledger that records transactions across all computer systems on its network.
The best part about blockchain networks is that it is tough to manipulate the financial information that is recorded on the digital ledger. This is attributable to the fact that transactions across a blockchain network are recorded in the form of “blocks,” and any involved block cannot be modified retroactively without affecting all subsequent blocks.
In other words, it is virtually impossible to game this system.
Now, there are two main problems that DeFi solves: lack of transparency and manipulation.
As each transaction is recorded on the public digital ledger, you know exactly what is happening with your money and where it is being used. Furthermore, since this foolproof system cannot be cheated, you and your money are safe.
Advantages of Decentralised Finance (DeFi)
There are many other advantages of using a decentralised financial system.
1. No Censorship
In contrast to CeFi, there is no censorship in DeFi—anyone can use any type of financial service they need.
This is a pretty big deal, particularly for underbanked adults.
2. No Geographical Restrictions
You can also conduct financial transactions with people from all over the world.
Again, this is not something you can do in a centralised financial system.
CeFi has geographical restrictions and does not allow you to receive or lend money to someone in another country.
DeFi users can freely engage in worldwide peer-to-peer (P2P) lending and borrowing.
However, users can only use crypto assets—the most popular of which is bitcoin (BTC)—rather than real assets such as gold or real estate.
Disadvantages of Decentralised Finance (DeFi)
1. Reliant on Technology
First and foremost, because DeFi is a digital ecosystem, it is entirely reliant on technology.
Therefore, there are some serious technical risks involved—one glitch and the whole financial system can come crashing down.
2. Volatility of Cryptocurrencies
Another threat to the decentralised financial system is volatility.
Because all major cryptocurrencies are highly volatile, this system is unpredictable.
Even if a person borrows stablecoin, they must put up collateral in the form of crypto assets.
The value of this collateral is not fixed and can drop drastically at any time.
3. Risk of Hacking
Furthermore, the transparency of the smart contracts themselves can be problematic. Because smart contracts can be seen and audited by any user, they are also exposed to hackers. This means that there is still a possibility of data manipulation.
4. Lack of Oversight & Regulation
The lack of oversight and regulation that characterises DeFi is still its biggest disadvantage. The general public is so reliant on the centralised financial system that the transition to DeFi seems almost unrealistic at this point.
Ethereum: The Most Popular, Open-Source Blockchain Network
Ethereum is among the most popular blockchain platforms, a decentralised public ledger that enables its users to use decentralised applications (dApps).
Ethereum has its own cryptocurrency, Ether (ETH), as well as programming languages called Solidity and Vyper.
After Bitcoin, Ether is the most popular cryptocurrency in the world, and it also ranks second in terms of market value.
Since there are no financial institutions involved in any financial transactions in DeFi, there are smart contracts to ensure compliance and prevent fraudulent activities.
These smart contracts are collections of codes and are not controlled by any central authority, but they run as programmed when certain predetermined conditions are met.
Once the code is deployed on the network, it cannot be changed.
Just like a traditional contract, these smart contracts lay down the rules of the transaction, but they are automatically enforced.
For example, if a person fails to repay a loan taken from another Ethereum user, their collateral is automatically liquidated, and the loan is settled.
In the world of DeFi, smart contracts substitute all financial institutions.
Popular DeFi Applications
1. Digital Exchanges (DEXs)
Digital exchanges function similarly to a marketplace, allowing sellers and buyers to connect and trade cryptocurrencies and fiat currency without the intervention of a central authority.
The entire exchange process is non-custodial and takes place through smart contracts.
In other words, no third-party owns the digital assets.
2. Peer-to-Peer (P2P) Lending Platforms
If you need a loan, you can approach an available user/peer directly, bypassing any middlemen.
Because both parties rely on smart contracts, there is absolutely no risk of fraud.
3. Stablecoin
Stablecoin was developed in response to the issue of cryptocurrency volatility.
Stablecoin is a type of cryptocurrency, similar to Bitcoin and Ether.
The only difference is that stablecoins are pegged to the value of a cryptocurrency, fiat money (government-issued currency like USD), or exchange-traded commodities (such as precious metals).
DAI is the most popular stablecoin cryptocurrency, with 1 DAI going at an exchange rate of $1.
Will Decentralised Finance (DeFi) Take Over the Traditional Financial System?
It is safe to say that decentralised finance (DeFi) has profoundly altered the financial landscape—and rightly so.
It gives people control over their money while also delivering efficiency and transparency.
Most importantly, it has dramatically decreased the risk of corruption and fraud.
Therefore, it appears to be the best financial system today.
Having said that, the system is still in its relative infancy and is not without shortcomings:
For all its flaws, this new financial system will see many more developments in the future.
If they deliver efficient solutions to the current gaps, there is a chance that DeFi will replace the existing centralised financial system as the future global financial system.
Now that I have shared all about Decentralised Finance (DeFi) and its pros and cons, what do you think of it? Do you think it will take over the traditional financial system?
https://synapsetrading.com/wp-content/uploads/2021/08/draft-2-Defi-thumbnail.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2021-08-04 20:49:322022-12-19 02:15:43What is Decentralised Finance (DeFi) and is it the Future of Finance?
Here are some of our recent forex trades, taken from our private signals channel for our students.
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Trading Advice
One of the easiest ways to make money is to ride a strong trend, so once you find a good trend, make sure you take full advantage of it, instead of trying to look for counter-trend trades which have a lower probability.
“As I said in my teachings, always go for the easiest trades, don’t be a hero.”
Forex Trade on AUD/CHF
This is how the whole AUD/CHF trade played out, starting from it’s triple top reversal to the subsequent long downtrend we traded.
Forex Trade on AUD/USD
This is one of the trades contributed by a member in our private student chatgroup, and I also shared this trade during my SkillsFuture training.
It is a perfect textbook example of the head and shoulders reversal pattern.
https://synapsetrading.com/wp-content/uploads/2021/08/trading-profits-020821.png238485Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2021-08-02 20:45:472022-03-07 18:07:41Market Analysis: Riding the Mega Forex Trend on AUD/CHF!
Last weekend, we conducted another online workshop on the basics of trading and investing, and since it is a SkillsFuture Credit-Eligible Course, participants could use their SkillsFuture credits to pay for the course instead of cash.
Thanks for the support! ?
During the 9 hours of training, participants learnt portfolio strategies to build and protect their wealth, as well as trading skills like market-timing, chart-reading and risk management to improve their trading results.
Here is some of the feedback and learning points from participants, after our hands-on market analysis session to find trading opportunities in the market.
If you are keen to learn more using your SkillsFuture credits, you can check out our courses:
