Crypto Basics 1 min read
Stablecoin
Also known as: USDT, USDC, DAI
A crypto token designed to hold a steady value, almost always pegged 1:1 to the US dollar.
Three main types
| Type | Examples | Mechanism | Risk profile |
|---|---|---|---|
| Fiat-backed | USDT, USDC | 1 token = 1 USD in a bank | Issuer / regulatory risk |
| Crypto-backed | DAI | Over-collateralized with ETH, stETH, USDC | Smart contract + collateral risk |
| Algorithmic | FRAX (partial) | Mint/burn against a volatile sister token | Fragile, historically broken |
Why they matter for markets
- Most BTC and ETH trading pairs are vs USDT / USDC.
- Stablecoin supply is a proxy for capital inflows into crypto. Growing supply often precedes bull moves.
- Stables are the rails of DeFi lending, AMMs and perpetual funding.
Frequently asked
Are stablecoins safe?
Fiat-backed stablecoins are only as safe as their reserves and the issuing entity. Crypto-backed are transparent but carry smart-contract risk. Algorithmic stablecoins have a history of catastrophic failures (UST).
Why do traders park in stables?
Moving to stablecoins is the fastest way to «go to cash» without leaving the crypto ecosystem, keeping capital on-chain or on an exchange.