Stablecoin.

In plain English

A stablecoin is a cryptocurrency whose value is designed to remain pegged to an external asset, usually the U.S. dollar. The largest stablecoins (Tether/USDT, USDC, DAI) are pegged 1-to-1 to the dollar. Pegs are maintained either by holding actual dollar reserves (cash and short-term Treasuries) or by algorithmic mechanisms that defend the peg using other crypto assets. Stablecoins are used widely as the 'cash' leg of crypto trading and as a way to move dollars cross-border outside the banking system.

01Why it matters

Stablecoins are now the largest single use of blockchain technology by dollar volume. Whether they remain stable matters because trillions of dollars in crypto trading and lending depend on it. The collapse of TerraUSD (UST) in May 2022 lost over $40 billion in investor value almost overnight; the algorithmic peg failed under pressure.

02The math, step by step

USDC, issued by Circle, briefly de-pegged in March 2023 when Silicon Valley Bank failed and Circle disclosed that $3.3 billion of USDC reserves were held there. USDC traded as low as $0.87 before the FDIC announced full SVB depositor coverage and the peg restored over the following days.

03What this is NOT