Why Can't Traders Live Without Stablecoins? Complete Guide to Stablecoins

Cryptocurrency markets are a volatility circus where your money can disappear in hours. But there is an escape: stablecoins, those “digital dollars” that maintain their value regardless of what Bitcoin does. In this guide, we explain what they are, how to use them, and which one to choose based on your strategy.

What would you do if you sell Bitcoin at $70,000 but don’t want to wait for it to drop completely?

The answer is simple: convert your gains into a stablecoin. Without waiting for the SEC to regulate, without losing in currency conversions, and without astronomical bank fees. You simply transfer your funds into a digital currency that always worth 1 dollar.

Stablecoins solve a fundamental problem: how to preserve value in the crypto ecosystem without suffering the sharp price swings of Bitcoin or Ethereum. They are cryptocurrencies specifically designed to keep their price fixed, usually anchored to the US dollar.

How they work: three ways to guarantee stability

Stablecoins don’t come from nowhere. Each uses a different mechanism to ensure that 1 token always equals $1:

Backed by real money (fiat-backed)

They are the simplest and safest. For every stablecoin in circulation, there is 1 dollar stored in a bank. It’s like having a recipe: 1 USDT = 1 USD in reserve. Tether (USDT) and USD Coin (USDC) work this way. Circle (issuer of USDC) audits its reserves monthly, providing peace of mind to institutional investors.

Backed by cryptocurrencies

Here, overcollateralization comes into play. To issue $100 in stablecoins, you deposit $200 in cryptos like Ethereum. Why double? Because Bitcoin and altcoins are volatile. If Bitcoin drops 40%, you still have enough collateral. DAI (DAI) operates under this model within the MakerDAO protocol.

Backed by real-world assets

Gold, Treasury bonds, real estate… everything has value. World Liberty Financial USD (USD1) is backed 1:1 by dollars and Treasury bonds held by BitGo. PAX Gold (PAXG) links each token to one ounce of physical gold stored in a vault.

Algorithmic (without tangible backing)

Ampleforth (AMPL) or Frax (FRAX) use code and smart contracts to automatically adjust supply based on demand. Higher demand = more tokens. Higher supply = less value needed to stabilize. More risk, more potential reward.

Practical cases: where and when to use them

Scenario 1: Protect yourself from inflation

In Argentina, where the peso loses value every month, storing money in pesos is losing money. Stablecoins are a refuge: USDT or USDC maintain their purchasing power. The same applies in Venezuela, Turkey, or any country with rampant inflation.

Scenario 2: Send money abroad without a bank

Your brother in Mexico needs $500. With USDT, it costs cents, arrives in minutes, without intermediaries, without questions. Banks charge $25+ and take days. Stablecoins break this model.

Scenario 3: Operate in DeFi without fear

You want to generate interest on Aave or MakerDAO. Deposit USDC, earn 5% annually with no volatility risk. Take a loan in DAI backed by your Ethereum. All without touching traditional banks.

Scenario 4: Market timing

You feel Bitcoin will fall. Sell, convert to USDC, wait. When the opportunity arises, buy back. Stablecoins are your temporary refuge, your “cash” in the crypto ecosystem.

The advantages you can’t ignore

✅ Predictable price: No surprises. 1 USDT today = 1 USDT tomorrow. Bitcoin can drop 20% overnight. Stablecoins? Always stable.

✅ Fast and cheap transfers: Sending USDT internationally costs cents and arrives in minutes. Bank transfers cost dollars and take days.

✅ Bankless access: You only need a wallet (Metamask, Trust Wallet, etc.). It doesn’t matter if you have a bank account. Phone + internet? Enough.

✅ Operate 24/7: Crypto markets never sleep. Stablecoins too. You can trade Sunday at 3 AM.

✅ Wide acceptance: Practically every exchange, every DeFi protocol, every wallet accepts stablecoins. Converting to local currency is instant.

✅ Diversification without risk: In volatile portfolios, stablecoins are the cushion. When everything rises, you keep crypto. When it falls, you safeguard in stablecoins.

Stablecoin ranking: where your money is safest

Updated data shows the real market landscape:

Tether (USDT): The undisputed king. Over $154 billion in circulation. Accepted everywhere. Its daily transaction volume ($56B makes it the most liquid. Risk: concentration of power, less transparency than USDC.

USD Coin )USDC(: The regulated option. Circle issues under supervision. Public monthly audits. Preferred by institutions, funds, and companies needing regulatory compliance. Less volume than USDT but more trust.

Ethena USDe )USDE(: The emerging star. Backed by Ethereum and futures positions. Generates automatic yield )up to 4% annually(. Recent but gaining traction. Risk: more complex model.

Dai )DAI(: The decentralized one. Backed by Ethereum and other crypto assets. Governed by the community. Perfect for pure DeFi. Requires more collateral than its circulating value.

World Liberty Financial USD )USD1(: Backed by U.S. Treasury and dollars. Custodied by BitGo. Designed for institutions. Multi-chain )Ethereum, BSC(. First-class security.

PayPal USD )PYUSD(: The PayPal ecosystem. Issued with Paxos. Focused on payments. Good for transfers, less for speculative trading.

Which to choose based on your activity?

If you seek maximum security and regulation: USDC. Public audits, Circle backing, institutional trust.

If you need maximum liquidity and acceptance: USDT. Although its model is less transparent, it’s everywhere.

If you want passive yield: USDE. Deposit in its protocol and earn interest automatically while maintaining stability.

If you want pure decentralization: DAI. No one controls it, only code and community.

If you’re an Asian trader: FDUSD. Optimized for transactions between Hong Kong institutions and the region.

If you operate in DeFi: DAI or USDC. They are the most integrated into Aave, MakerDAO, Curve.

Conclusion: stablecoins are not boring, they are essential

Yes, they don’t generate speculative returns like Bitcoin. But they are the heart of the crypto ecosystem. Without stablecoins, there would be no efficient trading, no accessible DeFi, no financial inclusion in inflationary countries.

In a balanced portfolio, stablecoins are as or more important than volatile altcoins. They are your safety net, your timing tool, your bridge to the traditional financial world.

In 2025-2026, with regulations reaching markets like the US and Europe, stablecoins will only grow. The future of digital money depends on them.