A stablecoin is a type of cryptocurrency designed to maintain a steady value by pegging itself to a reserve asset, most commonly the US dollar. One USDT or USDC, for example, is intended to always be worth approximately $1.00.
There are several approaches to maintaining a stable peg. Fiat-backed stablecoins (like USDT and USDC) hold reserves of actual dollars (or equivalent assets) in bank accounts. For every token in circulation, there should be a matching dollar in reserve. Users can mint new tokens by depositing dollars and redeem tokens for dollars.
Crypto-collateralized stablecoins (like DAI) use overcollateralized crypto deposits locked in smart contracts. If you deposit $150 worth of ETH, you might be allowed to mint $100 worth of DAI. The excess collateral absorbs price swings. Algorithmic stablecoins attempt to maintain their peg through automated supply adjustments, expanding or contracting token supply based on demand. This approach has historically been the riskiest, as demonstrated by the Terra/UST collapse in 2022.
Stablecoins live on various blockchains (Ethereum, Tron, Solana, and others), and you can transfer them 24/7 with settlement in minutes rather than the days required by traditional wire transfers.
Stablecoins serve as the on-ramp and off-ramp for crypto trading. Traders park profits in stablecoins during volatile periods without cashing out to fiat. They are also widely used in DeFi for lending, borrowing, and providing liquidity. Stablecoin market cap and flow data are closely watched indicators of capital entering or leaving the crypto ecosystem.
The Crypto Movers and Crypto Market panels on the TerminalFeed dashboard display market data that includes major stablecoins. Stablecoin dominance is part of the broader market health picture tracked across multiple panels.