Glossary

Stablecoin

A stablecoin is a crypto token designed to keep a steady value, usually one US dollar, by holding reserves or by using other mechanisms.

A stablecoin is a token designed to hold a steady price, most often one US dollar. Fiat-backed stablecoins keep reserves such as cash and short-term government debt. Crypto-backed stablecoins lock other tokens as collateral. Algorithmic designs use rules to adjust the supply.

Stablecoins act as the cash of the crypto market. Traders use them to move value between exchanges, to hold a position in dollars and to post margin. The issuer mints new tokens when customers deposit money and burns tokens when customers redeem them. The total supply therefore changes over time.

Stablecoins carry their own risks. A token can lose its peg when reserves are weak or when trust falls. The quality and disclosure of the reserves differ among issuers. Total stablecoin supply is a measure of the money available in the market. It is not a measure of the price direction.