One of the major risks of investing in crypto is extreme volatility. Your investment can double in value or be halved overnight or even in minutes.

This risk of taking significant losses in the blink of an eye discourages many from investing in crypto. And that’s why stablecoins have become very popular in the market.

Stablecoins are cryptocurrencies whose value is pegged to fiat, such as the US dollar (USD). They’re designed to maintain a stable value of $1.

This makes them ideal for investors who want to play with crypto but don’t want to expose themselves to volatility risk.

Below, we discuss the various stablecoin investment strategies to use to grow your wealth in crypto without taking unnecessary risks.

1. Stablecoin savings

Instead of keeping your cash reserve in a bank account, you’re better off holding it in USD-pegged stablecoins like USDT or USDC.

This gives you a strong advantage in a situation where your national currency loses value against the US dollar.

You will then be able to sell your stablecoin for more of your local currency than you originally used to buy the coins.

For example, the Nigerian national currency (Naira) was trading at N600 naira per $1 about 2 years ago. But right now, it’s trading above N1,500 per $1.

If you had bought $10,000 of stablecoin with N6,000,000 naira 2 years ago, you would have N15,000,000 naira right now without lifting a finger.

This strategy resembles a straightforward foreign exchange (forex) play but is executed passively through holding stablecoins.

It proves the potential of stablecoins to serve as a hedge against inflation and devaluation of your national currency, and their ability to help protect or even increase your purchasing power.

2. Stablecoin lending

Lending is a popular way to make your money work for you in crypto, and by using stablecoins, you completely avoid volatility and liquidation risks.

It’s not hard to find a 6% to 30% interest rate on your stablecoin lending, which is far more than a traditional bank will pay on your savings.

The best places to find or compare different lending platforms and rates are DeFillama and Beefy—a multi-chain yield aggregation platform.

To maximise the return on your stablecoin lending you can choose to lend and borrow on platforms that do not have their token yet to farm their potential airdrops.

In fact, you should lend and borrow exclusively on tokenless platforms. You’ll be killing two birds with one stone with very minimal risk.

3. Liquidity mining with stablecoins

With liquidity mining, you deposit your stablecoins to a stablecoin pool on a decentralised exchange (DEX) to earn a share of all trading fees generated from that pool.

This should be a long-term play and best with a sizeable capital as stablecoin pools usually have lower trading fees.

Meaning, you may need to leave your funds in the pool for an extended period to earn tangible rewardsexcept there’s strong trading volume to boost your reward.

Also, similar to lending, you can earn additional income through airdrops by providing liquidity on platforms that do not have a token yet or running airdrop campaigns for liquidity providers.

4. Stablecoins arbitrage trading

Arbitrage trading is the art of taking advantage of price differences for the same stablecoin across exchanges.

For example, USDT might be trading at $0.99 on one platform and $1.01 on another due to supply/demand imbalances.

Your job is to buy on the platform where the price is lower, send it to the other platform where it’s trading and sell there. The price difference is your profit.

To be successful with stablecoin arbitrage trading, you must have significant capital and be quick in trade execution.

Also, most arbitrageurs use bots to achieve speed efficiency, monitor price differences, and optimise for lower transaction fees.

5. Stablecoin Cash-and-Carry Trades

This is the art of exploiting funding rate differences in perpetual futures markets, for intermediate to advanced traders.

Cash-and-carry trades let you earn steady profits with stablecoins through the futures market without volatility risk.

For example, you buy $5,000 worth of USDT on the spot market, then short an equal $5,000 in USDT futures using 1x leverage to keep it safe.

When funding rates are positive—like 0.03% daily—you collect $1.50 a day, which adds up to $45 over a month.

Now hold this short position for a week to a month as long as rates stay positive, but you must exit if they turn negative.

To use this strategy, you need a futures account and at least $1,000 in capital, offering reliable, low-risk gains.

General risks of stablecoin investments

With stablecoins, you can completely avoid volatility and liquidation risks, but those are not the only risks you should be concerned about.

You must also ensure you stick to using only reputable and audited platforms to avoid custodial or smart contract risks.

Also, in rare circumstances, stablecoins can depeg from the USD and become unstable. That’s why we only recommend those with a proven track record of resilience (USDT and USDC).

Stick to those and diversify among them accordingly.