Stablecoins Explained: USDT, USDC and How They Hold $1

BullCalc Team · October 11, 2026 · 2 min read

If you trade crypto, you use stablecoins all the time. Most trading pairs are priced in USDT, and futures margin is often held in USDT or USDC. But what exactly is a stablecoin, and how does it stay at one dollar?

What a stablecoin is

A stablecoin is a crypto token designed to keep a steady value, usually 1 US dollar. It gives traders a way to stay in crypto without exposure to price swings, and to move dollars between exchanges quickly.

Types of stablecoins

Backed by reserves

USDT (Tether) and USDC are the best-known examples. The issuer says each token is backed by reserves such as cash and short-term government bonds, and lets large customers redeem tokens for dollars. If the price drifts below 1 dollar, traders can buy cheap tokens and redeem them, which pushes the price back up.

Crypto-backed

Some stablecoins are backed by other crypto held in smart contracts, usually worth more than the stablecoins issued, so there is a buffer if prices fall.

Algorithmic

These try to hold the peg with supply rules instead of full reserves. Several have failed badly in the past, which is why traders treat them with more caution.

Small differences in price

Stablecoins usually trade very close to 1 dollar, for example 0.999 or 1.001. That is why converting BTC to USDT gives almost the same number as the BTC price in dollars. The crypto converter uses live prices for both.

Risks to know

• De-peg risk: in stress, a stablecoin can briefly trade well below 1 dollar.
• Issuer risk: reserve-backed coins depend on the issuer holding what it says.
• Regulation: rules for stablecoins are changing in many countries.

Many traders spread large balances across more than one stablecoin and do not keep more on exchanges than they need.

This article is for education only and is not financial advice.