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What Are Stablecoins?

Learn why stablecoins exist, their explosive growth to a $320B market, and the role they play in modern crypto and global finance.

13 min · intermediate · part of Stablecoins & Pegged Assets

Introduction to Stablecoins

One of the biggest barriers to using cryptocurrencies like Bitcoin and Ethereum as money is **volatility**. A coffee that costs 0.0001 BTC today might cost 0.00007 BTC tomorrow. For traders, that volatility is opportunity. For people who just want to send a paycheck across a border or save in a stable currency, it is a problem. **Stablecoins** were created to solve this problem. They are blockchain-based tokens designed to maintain a stable value, almost always pegged 1:1 to the U.S. dollar. When you hold 1 USDT, 1 USDC, or 1 USDS, the issuer is targeting a price of $1.00 at all times. This might seem paradoxical. Why would anyone want a cryptocurrency that does **not** go up in value? The answer is that stablecoins are not designed to be speculative assets. They are designed to be **digital cash on rails**: programmable, borderless, instantly transferable dollars that work 24/7 without a bank. By early 2026, the total stablecoin market capitalization has grown to approximately **$320 billion**, up from $205 billion at the start of 2025. Stablecoins now settle more dollar volume in payments than most legacy networks. In 2025, stablecoin payment volumes hit roughly **$11.1 trillion**, an 85% jump from 2024's $5.99 trillion, and now rival Visa's $14.2 trillion in annualized payment volume.

Also in this lesson

  • Why Stablecoins Matter
  • The Stablecoin Market in 2026
  • How Stablecoins Maintain Their Peg
  • Risks to Be Aware Of
  • Practical Tips for Using Stablecoins
  • For Deeper Reading

Key terms

Stablecoin
A blockchain-based token designed to maintain a stable value, typically pegged 1:1 to the U.S. dollar.
Peg
The target price a stablecoin aims to maintain, almost always $1.00 USD for the major dollar-denominated stablecoins.
De-pegging
When a stablecoin trades meaningfully above or below its target value, as USDC did at $0.87 on March 11, 2023.
Arbitrage
Risk-free profit from price differences. In stablecoins, the mint/redeem arbitrage between the open market and the issuer holds the peg.
Reserve
The pool of cash, Treasuries, and other liquid assets a fiat-backed stablecoin issuer holds to back tokens in circulation.
Attestation
An accountant’s confirmation that an issuer held specific reserves on a specific date. Less rigorous than a full financial audit but standard in the stablecoin industry.
GENIUS Act
The first U.S. federal stablecoin framework, signed by President Trump on July 18, 2025. Requires 100% reserve backing, monthly disclosures, and AML compliance.
MiCA
The EU’s Markets in Crypto-Assets regulation. Stablecoin rules (ARTs/EMTs) took effect June 30, 2024; broader CASP rules December 30, 2024.
Tron (TRX)
A high-throughput blockchain that hosts the majority of USDT supply (around $78B in early 2026) thanks to low fees.
Mint and Redeem
The two-sided process by which authorized participants create new stablecoins (sending $1 to the issuer) or destroy them (returning a stablecoin for $1).

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Educational only — not financial advice.