Crypto and derivatives · updated October 21, 2026
What is a stablecoin and how does it keep its value
A stablecoin is a cryptocurrency that tries to always be worth the same as a regular currency: 1 USDT or 1 USDC should be worth $1. People use it to hold money on crypto platforms without being exposed to Bitcoin's swings, and to move money quickly.
How it works
The largest stablecoins (USDT, USDC) are issued by companies that say they hold one dollar in cash or short-term government bonds for every coin. When someone brings in $1, the company creates 1 coin; when coins are redeemed, it destroys them. Other types are backed by crypto or run by an algorithm, and those are more fragile.
Worked example
You hold 1,000 USDC. If the coin loses its link to the dollar and drops to $0.97, your money drops with it.
In March 2023, USDC briefly fell below $0.90 after part of its reserves got stuck at a US bank that collapsed. It was back at $1 within a few days.
Worth knowing
A stablecoin is only as safe as the reserves behind it and how often independent auditors check them.
When stablecoin can fool you
Losing the peg (depeg): TerraUSD (UST), an algorithmic stablecoin, collapsed almost to zero within days in May 2022. Not a bank deposit: your money is not covered by any deposit guarantee scheme. The issuer matters: in the EU, the MiCA regulation requires issuers to be licensed and to hold reserves.
Related terms
Learn it in the Academy
Questions about stablecoin
Do stablecoins pay interest?
Some platforms pay you a return if you lend them your coins. The risk is yours: if the platform goes bust, you can lose everything. The issuer itself does not pay you interest.
What is the difference between USDT and USDC?
Both track the dollar. USDT is issued by Tether, USDC by Circle. They differ in how they publish their reserves and which rules they operate under.
These explanations are for information only. They are not a recommendation to buy or sell.
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