Stablecoin

Most cryptocurrencies swing in price by the hour. Stablecoins solve that by pegging (fixing) their value to a reference asset, most commonly the US dollar. Because the target price is always $1.00, stablecoins function as a relatively steady medium of exchange inside the crypto ecosystem without converting back to traditional bank accounts. You can follow the broader crypto landscape on live crypto prices.

Reserve type is the critical distinction between stablecoin varieties. Fiat-backed stablecoins hold actual dollars or short-term government securities in a custodian bank — every token issued is supposed to be redeemable for a real dollar. Crypto-backed stablecoins use other cryptocurrencies as collateral, usually requiring more than $1 of collateral per $1 of token to absorb price swings. Algorithmic stablecoins rely on code and incentives rather than hard reserves to defend the peg — a model that has proven fragile in practice. See depeg for what happens when the mechanism fails.

A common confusion: "stable" refers only to the price target, not to the safety of the issuer or the quality of its reserves. Traders typically inspect audit reports and reserve breakdowns because a fiat-backed stablecoin is only as sound as the assets actually held. For broader context on how digital assets are structured, see our stablecoins guide.