Crypto prices can swing wildly, which makes everyday use tricky. Stablecoins were created to solve this: they’re cryptocurrencies designed to hold a steady value, usually pegged to a currency like the US dollar.
Why use a stablecoin?
- To park funds during volatile markets without leaving crypto entirely.
- To send value quickly and cheaply across borders.
- To trade and use DeFi apps with a predictable unit of value.
The main types
- Fiat-backed: each coin is backed by real reserves (e.g. dollars) held by a company.
- Crypto-backed: backed by other cryptocurrencies locked as collateral.
- Algorithmic: use code and incentives to hold the peg — historically the riskiest type.
What to keep in mind
A stablecoin is only as trustworthy as whatever backs it. With fiat-backed coins, that means trusting the issuer holds genuine reserves. “Stable” doesn’t mean risk-free — some stablecoins have lost their peg in the past. Stick to well-established, transparent options and understand how each one keeps its value.