Stablecoin

Nearly every crypto price you see quoted is a stablecoin price, because most global bitcoin trading is priced in USDT rather than in bank dollars. Tether's supply passed 100 billion dollars in March 2024, all of it a liability of one company. That is the trade you are making: blockchain settlement speed with a corporate balance sheet standing behind the value.

How it works

Three stablecoin designs have been tried, and only one of them still holds meaningful money.

Fiat-backed tokens dominate. You hand an issuer a dollar, it mints a token and puts the dollar into short-term government debt and bank deposits. USDT and USDC work this way. The peg holds because large customers can redeem directly at par, which gives arbitrageurs a reason to buy the token whenever it slips below a dollar. That redemption door is not open to retail: Tether's terms set a minimum direct redemption around 100,000 dollars, so for almost everyone the peg is whatever the secondary market says it is on the day.

Overcollateralized designs lock crypto worth more than the tokens issued against it and liquidate positions automatically when the collateral falls. They survive stress but they are small, because locking 150 dollars of volatile collateral to mint 100 dollars is expensive.

Algorithmic designs held no reserves at all and tried to defend the peg with a second token and a mint-and-burn incentive. TerraUSD was the largest of them and collapsed to near zero within a week in May 2022, taking its sister token with it. The category has not recovered and should be treated as a failed experiment rather than an option.

Even a fully reserved token inherits the banking system it depends on. USDC fell to roughly 87 cents on March 11, 2023 because 3.3 billion dollars of its reserves were stuck at Silicon Valley Bank over a weekend, and it recovered only when US authorities guaranteed the bank's deposits. The blockchain worked perfectly throughout. The bank was the problem.

Why this matters when you buy bitcoin

If you buy bitcoin anywhere outside a handful of well-banked countries, a stablecoin is probably standing between your money and your coins.

The deepest bitcoin market on Binance is priced in USDT, not in dollars or euros. So if you hold euros there, buying bitcoin means two conversions: euros into USDT, then USDT into bitcoin, with a fee and a spread at each step and an issuer's IOU in your hands in between. The trading fees are small at 0.1 percent a side, but the stablecoin's own price is the hidden cost. Buy USDT at 1.002 dollars and you have paid 0.2 percent before touching bitcoin, which is more than the trade itself.

Where a real fiat pair exists, take it. Bitstamp quotes bitcoin directly against dollars, euros and pounds. Kraken lists it against seven national currencies. Yellow Card and Luno build around local African and Southeast Asian rails, which is often the only sensible route in markets the dollar-quoted venues do not serve.

Rules vary sharply by country, which is why this shows up throughout our country guides. MiCA's stablecoin provisions applied across the EU from June 30, 2024, and platforms serving the European Economic Area removed pairs from issuers that had not obtained authorization, so European users found familiar tokens disappearing from their screens. In the United States the GENIUS Act was signed on July 18, 2025 and requires full backing in cash and short-term Treasuries plus regular reserve disclosure.

The last point is the one people learn expensively. A stablecoin balance is two promises stacked: the issuer's promise to honour the token, and the exchange's promise to honour your account. Neither is bitcoin, and neither is in your custody. Parking value in a stablecoin between trades is a decision to keep taking that risk, and issuers can and do freeze balances at specific addresses when law enforcement asks, which is not something anyone can do to coins in your own wallet.

The euro buyer's two-conversion problem

Work through what a 1,000 euro bitcoin purchase costs through a stablecoin pair and through a fiat pair.

Through a USDT pair: convert euros to USDT and pay a taker fee, then convert USDT to bitcoin and pay another. Two fills at 0.1 percent is 2 euros. Add the euro-to-dollar-stablecoin spread and whatever premium USDT itself carries that day, and the round trip lands somewhere between 3 and 7 euros with two spreads you never see itemized.

Through a fiat pair: one fill of BTC/EUR on Kraken Pro at the 0.40 percent taker rate is 4 euros, and there is no second spread and no stablecoin exposure at any point.

The headline fee makes the stablecoin route look cheaper and the total cost usually does not, and the comparison flips again on a venue with 0.1 percent fiat pairs. The point is not that one always wins. It is that the fee schedule is only half the price, and every extra hop adds a spread and a counterparty.

Stablecoin vs CBDC

A stablecoin is issued by a private company; a central bank digital currency is issued by the state itself.

Both are database entries with an issuer who can freeze them, which is why they get lumped together. The difference is what backs the balance. A stablecoin is a claim on a company's reserves, and the company can fail, get frozen out of its banks, or be wound up. A CBDC is the central bank's own money, so it carries no credit risk and instead carries whatever surveillance and policy powers the issuing state builds into it. The timelines differ too: Tether has circulated since 2014, while the European Central Bank has kept the digital euro in a preparation phase since November 2023 without issuing anything.