Guide
Stablecoins Explained: Types and Risks
Bottom line: crypto with a stable price
A stablecoin is a crypto asset pegged to a fiat currency such as the US dollar, to avoid the wild swings of other crypto. Examples include USDT and USDC.
Key takeaways
Stablecoins are used for fast transfers, as a place to wait out volatility, and across DeFi. But "stable" depends on the design — pegs have failed before.
Main types
| Type | Backing | Note |
|---|---|---|
| Fiat-backed | Dollar reserves | Depends on the issuer's trust |
| Crypto-backed | Over-collateralized crypto | Decentralized but volatile collateral |
| Algorithmic | Code-managed supply | Higher risk; has collapsed before |
Don't over-trust "stable"
In 2022 an algorithmic stablecoin collapsed and lost most of its value. Check the issuer's transparency and reserves.
Sources
- Ethereum.org — stablecoins: https://ethereum.org/en/stablecoins/
Not financial advice
This article is for information only and is not investment advice. Crypto assets are volatile and carry risks including hacking. Do your own research and only use money you can afford to lose.
This article is informational only and is not financial, investment, or trading advice. Prices are reference snapshots and may be outdated. Always do your own research.
