What are stablecoins and why they matter in crypto markets

Stablecoins are cryptocurrencies built to keep a steadier value, often pegged to the U.S. dollar. In crypto markets, they function as “digital cash,” letting traders exit volatile positions like Bitcoin or Ethereum without switching back to traditional fiat. They also support liquidity and are widely used in DeFi for lending, borrowing, and trading. The most common stablecoins, USDT (Tether) and USDC (USD Coin), aim to trade near $1. Most maintain the peg through issuer reserves—such as cash and short-term U.S. government securities—though temporary deviations can occur and persistent “depegs” are the key risk.