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What Is a Stablecoin?
Stablecoins are crypto assets designed to hold a steady price. Learn how they work and what can go wrong.
Designed for stability
A stablecoin aims to keep a stable value, most commonly one US dollar. This makes it useful as a place to park value between trades without leaving the crypto market.
Types of stablecoins
Fiat-backed stablecoins, such as USDT and USDC, are supported by reserves held by an issuer. Crypto-backed stablecoins, such as DAI, are over-collateralized with other crypto. Algorithmic designs try to hold the peg with code alone and have historically been the riskiest.
Why traders use them
Stablecoins are the most common trading pairs, they move quickly between wallets and exchanges, and they let you avoid volatility without cashing out to a bank.
Risks to know
A stablecoin can lose its peg if its reserves are doubted or its mechanism fails. Check the issuer, the reserves reporting, and avoid holding more in one stablecoin than you are comfortable with.
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Educational content only, not financial advice. Crypto assets carry a high risk of loss.
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