The one thing bulls and bears can agree on when it comes to crypto is that trading in digital currencies is risky. Volatility is part of the game, and last week alone had some wild swings in both directions. All cryptocurrencies carry some form of risk, but there are some that may prove to be steadier than the pack.
There are plenty of stablecoins out there, pegged roughly to the dollar or some other steady international currency. They may not seem very exciting on their own, but if you're willing to let a trading exchange or platform pledge, stake, loan, or otherwise use your crypto, you can earn at least 8% a year in passive income on the most popular denominations.
If you're aiming higher -- and willing to take on some more risk -- you may want to warm up to Bitcoin (BTC 0.88%), Terra (LUNC 2.25%), and Paxos Gold (PAXG 0.33%). These three cryptocurrencies are not for the weak of heart, but given heavier volatility profiles that you will find elsewhere they are among the most risk-averse cryptocurrencies available right now.
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Bitcoin
The downside to Bitcoin isn't any different than any other digital currency that isn't tethered to another asset -- it's still 100%. Bitcoin also lacks the use cases that you will find in less widely owned cryptocurrencies that are rising in popularity as they fuel non-fungible token (NFT) marketplaces, gaming coins, and other decentralized finance (DeFi) apps.
However, as the world's largest denomination with a market cap the size of its next eight closest currencies combined, there is some degree of safety to Bitcoin. When banks, countries, or even cash apps announce a push into crypto, they start with, and often stay with, Bitcoin. It's the original platform. Bitcoin can help its own luck by improving on its utilization, but if a shakeout happens to rid the market of some of its more speculative tokens it's fair to say that Bitcoin will stick around.
Terra
Several rungs lower than Bitcoin on the market cap chain you will find Terra, the native token of the TerraUSD (USTC 2.80%) stablecoin project. With a market cap of $29 billion, it's a lot smaller than Bitcoin, which is approaching a valuation of $720 billion. Terra has an important purpose within its ecosystem that includes the dollar-based TerraUSD and other stablecoins tethered to other denominations.
TerraUSD is a stablecoin that is currently earning as much as 19.5% in annualized interest when staked through a Terra-helmed savings and lending protocol. The more popular stablecoins become for income-chasing investors, the more lucrative Terra becomes. As TerraUSD is created to meet the rising demand, Terra is burned from the community pool. There was $21.5 billion in Terra deployed in DeFi apps as of Sunday night, offering some kind of near-term floor in the crypto as long as there's not a run on its featured apps.
Paxos Gold
Let's close with an app that gold bugs can warm up to. Paxos Gold is a crypto backed by actual gold reserves. Each Paxos Gold token is redeemable for a single troy ounce of gold in the vaulted custody of the for-profit Paxos and its partners. In short, Paxos Gold should mirror the price of physical gold.
Why would you buy Paxos Gold when you can just load up on gold bars or mining index funds? Well, here is when we get to the ability of crypto to generate some passive income. Paxos Gold held in an account at Celsius Network -- a platform with more 2 million community members and $20 billion in assets -- is currently yielding 5.5%. You get the asset diversification of gold with a staking opportunity for some incremental yield. You could do a lot worse if you were approaching precious metals as an alternative asset class.
