What is a stablecoin? Crypto that tracks the dollar, used like cash
Short answer
A stablecoin is a cryptocurrency pegged to a regular currency, most often the US dollar, so 1 coin is worth about 1 USD. USDT and USDC are the best known. On an exchange it works like cash: you change your money into a stablecoin first, then use it to buy other coins.
- Stable means the price, not the returns. Promises of high returns just for holding stablecoins are usually a scam.
- Stablecoins still carry risk: if the issuer runs into trouble, the price can drop below 1 USD.
- The same stablecoin can move on several blockchains, so pick the right network when you withdraw.
In one line
A stablecoin is a coin whose price follows the US dollar (or another currency). For a dollar stablecoin, 1 coin is worth about 1 USD.
An example
You want to buy some bitcoin:
- First, buy 100 USDT with your local currency.
- Then use the 100 USDT to buy BTC on the spot market. The trading pair is written BTC/USDT.
Selling works the other way around: you sell back into USDT first.
Related
FAQ
Can I lose money on a stablecoin?
Yes. The price is usually steady, but it can drop below 1 USD if the issuer runs into trouble. And if you put it into another investment, you take on that investment's risk too.
What's the difference between USDT and USDC?
Different companies issue them: Tether issues USDT, and Circle issues USDC. Both are pegged to the US dollar and widely used on exchanges.
How do I buy stablecoins with my local currency?
Usually with a bank card on the exchange, or from another user through P2P. With P2P, only place the order and confirm payment inside the platform.