Stablecoins, Explained

Stability is engineered

A stablecoin targets another asset's value through reserves, overcollateralization, market incentives or combinations of these. A target is not a guarantee, especially during redemptions or stressed liquidity.

Follow the liabilities

For reserve-backed coins, study the issuer, asset quality, custody, attestations, redemption access and legal seniority. Token holders may face bank, custodian and regulatory risks beyond blockchain mechanics.

Check control as well as code. Token supply, upgrades, custody, governance, and market access may depend on different parties.

Network risk remains

The same token can circulate on multiple networks or bridges. Users must verify the contract and chain; issuer solvency does not protect a mistaken transfer or a compromised bridge.

How the main designs hold their value

Fiat-backed stablecoins — USDT, USDC and others — are issued by companies that hold reserves of cash, Treasury bills and similar assets and promise to redeem tokens for dollars on request. Arbitrage keeps the market price near a dollar: if the token trades below, buyers redeem at par and pocket the difference.

Crypto-collateralised designs, mostly on Ethereum, lock other tokens worth more than the stablecoins issued and liquidate positions that fall short. Algorithmic designs that tried to hold a peg with a companion token and no external collateral have failed, most famously TerraUSD in May 2022.

What to check before relying on one

Read the issuer's reserve reports: how often they are published, who attests to them, what the reserves consist of and how quickly they could be sold. Check the redemption terms — who may redeem, at what minimum, with what fees and delays.

Understand the issuer's power to freeze addresses, which most fiat-backed issuers have and use; a stablecoin balance held in the same app as a Bitcoin wallet carries that issuer risk while the bitcoin beside it does not. Note where the issuer is regulated: MiCA in the EU and the 2025 U.S.

framework impose reserve and disclosure rules on issuers operating there, and the Bitcoin regulation guide explains how those regimes fit together. And watch the market price on large venues; a sustained discount is the early signal of trouble.

Why this site keeps USD and USDT apart

A price quoted in USDT is a price in a token whose value depends on a private issuer's reserves and redemption; a price in dollars is a price in cash. They track closely in normal conditions, which makes it tempting to blend them into one Bitcoin price, and they diverge exactly when it matters — when the token itself wobbles or fiat withdrawals are constrained.

Bitcoin.now's USD reference is built only from fiat venues, and its USDT markets are labelled as such. The stablecoin peg monitor on this site tracks the major tokens against the dollar continuously.

Separate the token from the claim

Record who can change supply, code, access, or custody, then check whether the claimed use requires trusting that party. A market price does not answer those control questions.