What are stablecoins?

Stablecoins are cryptocurrencies that are relatively stable and pegged 1:1 to a currency we commonly use. In most cases, this is the US dollar (USD). There are even stablecoins pegged to the price of gold. Currently, several stablecoins are available on various exchanges. Behind every stablecoin is a company that ensures that for every coin issued, a dollar (or another fiat currency) is held in reserve. These companies bear the responsibility of actually owning the underlying assets.

The stablecoin market has grown enormously and has a total market capitalisation of more than $300 billion in early 2026. Stablecoins have become an essential part of the crypto market and are increasingly being used outside of crypto as well, for example for international payments and by major companies like Visa and Mastercard.

Which stablecoins are there?

• USDT (Tether): Pegged 1:1 to the dollar. By far the largest stablecoin with a market capitalisation of more than $185 billion and a market share of approximately 60%. Tether is not fully transparent about its reserves and does not hold a MiCA licence in Europe.
• USDC (USD Coin): Pegged 1:1 to the dollar. Issued by Circle, which went public in 2025. USDC is considered the most transparent and regulated stablecoin, with reserves consisting entirely of US Treasury bills and bank deposits. Market capitalisation of more than $75 billion.
• DAI (Maker): Pegged 1:1 to the dollar. A decentralised stablecoin that is not managed by a single company, but by smart contracts on the Ethereum blockchain. DAI is backed by other cryptocurrencies as collateral.
• USDe (Ethena): Pegged 1:1 to the dollar. A synthetic stablecoin that maintains its peg through a delta-hedging strategy using staked crypto and short positions. Has quickly grown to a market capitalisation of more than $11 billion.
• PayPal USD (PYUSD): Pegged 1:1 to the dollar. Issued by PayPal, making it one of the first stablecoins from a major payments company.

Stablecoins that no longer exist or have lost significant relevance:

• Binance USD (BUSD) was discontinued in 2023 after regulators intervened with issuer Paxos.
• TerraUSD (UST) completely collapsed in May 2022, wiping out tens of billions in value. This was an algorithmic stablecoin without real reserves.

What are stablecoins used for?

Traders use stablecoins to quickly switch to fiat. On an exchange, it is often not possible to quickly go from Bitcoin to euros, for example. For this, Bitcoin would first need to be withdrawn and converted to euros via a broker. But in the fast-moving crypto market, you need to be able to act quickly. So if a trader expects the price of Bitcoin to drop, they can buy USDT at the current price.

Example: 1 BTC currently costs $65,000 and you expect the price to drop. You can then take a position in a stablecoin and convert 1 BTC into 65,000 USDT. If the price actually drops to $55,000, you can then buy back approximately 1.18 BTC with your 65,000 USDT. That means 0.18 BTC in profit. Stablecoins are also increasingly used to earn interest.

On platforms like Bitvavo and Bybit EU you can stake stablecoins or put them into earn products for an annual return.

The advantages of stablecoins

• You always have a stable price while trading
• You can take a break by switching back to USD
• Ability to protect your position
• Away from the intense volatility
• You can earn attractive interest on your stablecoins

The disadvantages

• Some companies behind a stablecoin are not transparent and may not actually hold the underlying assets
• Companies behind a stablecoin can manipulate the market by printing new stablecoins and issuing them without holding the corresponding fiat (only when there is a lack of transparency)
• There is a centralised company behind the coin (with the exception of decentralised stablecoins like DAI)
• Although the coin should be equal to 1 USD, it can sometimes deviate by a few percent, especially during high volatility
• Not all stablecoins comply with European MiCA legislation. USDT (Tether), for example, is not MiCA compliant, which has led some European exchanges to limit its availability. USDC is regulated and is therefore increasingly the preferred choice for European users.