What is a stablecoin?
Stablecoins are a type of cryptocurrency designed to maintain a stable value, often pegged to a stable asset such as the US dollar (USD), gold, or other fiat currencies. Unlike Bitcoin or Ethereum, which have prices that fluctuate wildly, stablecoins maintain a value that is nearly fixed (typically fluctuating around 1 USD if pegged to USD). There are three main types of stablecoins:
1. Fiat-backed: Backed by fiat currency (USD, EUR), e.g., USDT (Tether), USDC (Circle), BUSD. Each token is backed by a corresponding amount of money in the bank.
2. Crypto-backed: Backed by other cryptocurrencies (like ETH), e.g., DAI (MakerDAO). This type is usually more decentralized but more complex.
3. Algorithmic: Not backed by collateral, the price is adjusted by algorithmic supply-demand, e.g., UST (before its collapse in 2022). This type is riskier.
Recent situation of stablecoins
As of July 2025, stablecoins account for a large share of the crypto market, with a total market capitalization exceeding $200 billion (according to CoinMarketCap). USDT still leads with over $120 billion in market cap, followed by USDC (~$45 billion) and DAI (~$6 billion). Some recent highlights:
• Growth in usage: Stablecoins are widely used in DeFi (decentralized finance), accounting for over 70% of TVL (Total Value Locked) on platforms like Aave, Curve, or Suilend (on Sui). They are also the primary tools for trading, cross-border payments, and safely storing value when the market is volatile.
• Multi-chain integration: Stablecoins are now available on multiple blockchains like Ethereum, Solana, Sui, and Aptos. For instance, USDC has integrated with Sui via Wormhole, boosting liquidity in this ecosystem.
• Regulatory framework: In 2025, regulators (like SEC, EU) are tightening regulations on stablecoins. USDC and USDT must publicly report collateral assets periodically to ensure transparency. This increases trust but also puts pressure on decentralized stablecoins like DAI.
• Incidents and risks: The Cetus Protocol hack on Sui (loss of $223 million, July 2025) highlights security risks in stablecoin pools. Additionally, the memory of the UST collapse still makes traders cautious with algorithmic stablecoins.
Role of Stablecoins
Stablecoins are the "blood" of the crypto market, playing many important roles:
1. Safe haven: When Bitcoin or altcoins dump significantly, traders switch to stablecoins to preserve capital. For example, when BTC dropped from $90k to $80k last week, the inflow into USDT increased by 5%.
2. DeFi liquidity: Stablecoins are the backbone of lending, borrowing, and yield farming protocols. They help traders earn interest (APY 5-20% on Aave) without worrying about price volatility.
3. Payments and remittances: Stablecoins enable global money transfers at low cost, faster than SWIFT. For example, USDC is used for payments on wallets like OKX Wallet.
4. Bridge between TradFi and DeFi: Stablecoins help connect traditional finance (TradFi) with crypto, attracting large institutions like BlackRock (launching a stablecoin-based ETF fund in early 2025).
Future outlook
Stablecoins will continue to be a pillar of the crypto market, but the future will bring both opportunities and challenges:
• Short term (Q3-Q4 2025): The market capitalization of stablecoins may reach $250 billion due to increasing demand for DeFi and payments. USDC and DAI will benefit from decentralization trends, while USDT will continue to dominate due to liquidity. However, legal pressure may slow the growth rate of opaque stablecoins.
• Mid-term (2026-2027): Stablecoins will integrate more deeply with CBDCs (central bank digital currencies). Countries like the EU and China may launch CBDCs, competing directly with USDT/USDC. Decentralized stablecoins like DAI may surge if DeFi continues to expand.
• Long term (2030): Stablecoins will become the main payment method in the digital economy, especially in developing countries. However, algorithmic stablecoins will struggle to regain trust after collapses. Projects like Sui with stablecoin integration (USDC, USDT) may lead in building payment and gaming ecosystems.
Strategies for traders
• Hedge risk: Use USDC/USDT to lock in value when the market dumps. Don't hold too many stablecoins long-term as they don't yield as high as staking altcoins.
• Yield farming: Stake USDC/DAI on protocols like Curve or NAVI Protocol (Sui) to earn an APY of 5-15%. Choose pools with clear audits to avoid hacking risks.
• Legal monitoring: If regulations tighten (like EU MiCA), prioritize transparent stablecoins like USDC. Avoid projects lacking collateral asset reports.
• Diversification: Combine stablecoins with other assets (BTC, ETH, SUI) to balance risk/return. For example, hold 20-30% of your portfolio in stablecoins when the market is volatile.
Conclusion
Stablecoins are not just a "safe haven" but also a driving force for DeFi and global payments. With the development of blockchains like Sui, Solana, and Ethereum, stablecoins will become increasingly important. However, be cautious of security and legal risks. As a trader, use stablecoins as a strategic tool, not as a place to "put all your eggs in one basket." Stay sharp, do thorough research (DYOR), and always manage capital tightly!