What Stablecoins Are and Why Their Supply Matters

4 min read · updated 14 November 2026

Stablecoins are tokens designed to hold a steady value, usually one US dollar. Learn the main types, the risks and why traders watch total stablecoin supply.

A stablecoin is a crypto token designed to keep a steady value, usually one US dollar. Tether (USDT) and USD Coin (USDC) are the largest. You can compare them on the stablecoins page.

The main types

• Fiat-backed: the issuer holds cash, bank deposits or short-term government bonds and promises to redeem each token for one dollar. USDT and USDC work this way.
• Crypto-backed: the token is backed by more crypto than it is worth, locked in smart contracts. DAI started this way.
• Algorithmic or synthetic: the peg is held by trading strategies or rules rather than cash reserves. Some of these have failed badly in the past.

Why supply matters

Stablecoins are the main cash of the crypto market. Traders park money in them between trades, and many exchanges price coins against them. When total supply grows, new money is usually coming into crypto. When it shrinks, money is leaving.

That is why stablecoin supply is one of the five factors in the Market Pulse score on the dashboard. The supply history comes from DefiLlama.

Risks

• A stablecoin is only as good as its reserves and the issuer's ability to redeem.
• Prices can slip below one dollar during stress, even for large stablecoins.
• Issuers can freeze tokens at specific addresses, and rules differ by country.

This guide is general information, not financial advice.