What Is a Stablecoin?
Most cryptocurrencies are famous for wild price swings. Stablecoins are the deliberate exception: crypto designed to hold a steady value, usually pegged one-to-one to a currency like the US dollar. Not investment advice.
How they stay stable
The most common type is backed by reserves — for every coin issued, the company holds roughly a dollar (in cash or safe assets) to redeem it. Others use algorithms or crypto collateral, though those have proven riskier.
What they’re for
- Trading: a place to park value between crypto trades without cashing out.
- Payments & transfers: moving “dollars” across borders quickly, cheaply and around the clock.
- Access: dollar-like savings for people whose local currency is unstable.
The risks
A stablecoin is only as good as its backing. If reserves are thin or a peg breaks, the coin can “de-peg” and fall below its target — which has happened. Regulation is still catching up.
Where they fit
Stablecoins sit between traditional money and crypto — see cryptocurrency vs fiat for the bigger picture. Track real currencies and major crypto side by side on our converter.