Stablecoins 101: How USDT and USDC Hold Their Peg
The dollar rails of crypto. How fiat-backed stablecoins maintain $1 — and what can break it.
Fiat-backed stablecoins like USDT and USDC aim to hold a constant $1 value by backing each token with reserves — cash and short-term treasuries. Arbitrage keeps the price near peg: traders mint and redeem to profit from small deviations.
Pegs break when confidence in reserves falters or redemption is restricted, as algorithmic experiments have shown dramatically. The key questions for any stablecoin are simple: what backs it, who audits it, and can you redeem 1:1 on demand?
This article is for information only and is not financial advice. Always do your own research before investing in crypto assets.
Written by
Anika Patel
Stay ahead of the market. Get our crypto analysis in your inbox, free.