Definition
A cryptocurrency designed to hold a fixed value, usually pegged to one U.S. dollar, by holding reserves or using other stabilization mechanisms. It trades on crypto rails but aims for none of crypto's price swings.
Why it matters
Stablecoins are how crypto users park value between trades and move dollars across exchanges, but the peg is a promise, not a guarantee. They carry issuer and reserve risk and are not FDIC-insured bank deposits, even when the balance reads like one.
Example
A crypto holder sells $2,000 of a volatile coin into a stablecoin during a wild week. The balance stays near $2,000 regardless of the market, but its safety now depends on the issuer's reserves; if the peg breaks, that $2,000 can suddenly be worth less.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.