Integrating cryptocurrency into your business can help you handle payments, manage treasury, and conduct cross-border transactions. Some cryptocurrencies, however, are more volatile than others. It’s generally considered best to work with a token that you can count on to hold its value—a feature typically associated with stablecoins. But not all stablecoins function exactly the same.

Below, we’ll break down cryptocurrency stability, including how to assess it, how to measure it, and the risks involved even with the most stable forms of crypto. We’ll also explore how to pick the right cryptocurrency for your business’s needs.

What’s in this article?

• What is the most stable cryptocurrency?
  
• What does stability mean in the context of cryptocurrencies?
  
• How can businesses assess a cryptocurrency’s stability?
  
• Which stablecoins have demonstrated the strongest long-term stability?
  
• How does market structure affect stability?
  
• What risks remain even for the most stable cryptocurrencies?
  
• How Stripe Payments can help
  

What is the most stable cryptocurrency?

Stablecoins are generally considered the most stable cryptocurrency. They’re predictable tokens designed to hold their value, no matter what the rest of the market is doing. A stablecoin is designed to stay pegged, or tied, to a specific real-world asset, often the US dollar (USD). While Bitcoin can swing in price from one day to the next, a stablecoin such as USD Coin (USDC) is built to stay as close to $1 as possible.

That price stability is typically enforced in one of two ways:

• Reserve-backed: When each individual token is backed by real-world assets such as cash or short-term US Treasuries (T-Bills).

• Collateralized onchain: When smart contracts lock up other crypto assets to over-secure the value of the stablecoin.

There are four main types of stablecoins, with fiat-backed coins typically considered the most stable overall.

Here’s how each type functions:

• Fiat-backed stablecoins: Every token issued has a matching fiat currency—or cash equivalent—sitting in a reserve account. That reserve gives users confidence the token can be redeemed at any time for actual currency. USDC and Tether (USDT) are widely used examples of fiat-backed stablecoins. They tend to hold their $1 peg tightly unless access to those reserves is disrupted.

• Commodity-backed stablecoins: These use assets such as gold for collateral instead of cash. Tokens such as PAX Gold (PAXG) and Tether Gold (XAUt) track the price of a specific amount of gold per token. The tokens are stable relative to that commodity, so their value fluctuates as gold’s value does. These can be useful for investors hedging inflation but less so for businesses that need dollar stability.

• Crypto-collateralized stablecoins: These use overcollateralized crypto deposits to back new tokens. Dai (DAI) is an established stablecoin of this type. Crypto-collateralized stablecoins are fully onchain and don’t rely on a central issuer, but their value can drift more during market stress, especially if the collateral itself is volatile.

• Algorithmic stablecoins: Algorithmic stablecoins use code to maintain their peg. If the price slips, the protocol burns supply; if it rises, it mints more. It’s elegant in theory but can be brittle in practice. TerraUSD’s collapse in 2022, which lost $40 billion for investors, showed how quickly this model can falter without real assets to back it up.

What does stability mean in the context of cryptocurrencies?

In crypto, “stable” means the token is reliable enough to generally hold value, pay vendors, or move money across borders. There’s no such thing as perfect stability, but dependable stablecoins hold their pegs remarkably well, with price deviations typically measured in fractions of a cent. If they fluctuate slightly, market forces such as arbitrage and redemptions act to bring them back to the peg. Thanks to their stability, stablecoins have become useful infrastructure for transferring value between individuals and between businesses.

How can businesses assess a cryptocurrency’s stability?

Stablecoins can help businesses move money globally faster and more affordably than traditional payment networks. But every stablecoin option has its own advantages and disadvantages.

Here’s what businesses need to evaluate when considering a stablecoin.

Peg reliability

Businesses need to track how closely a token sticks to its target price over time. A brief dip to 99.7¢ typically isn’t a problem, but a sustained drop to 91¢ might be. The best stablecoins can show resilience even through stressors such as bank failures, market crashes, and liquidity crunches.

Reserve quality and transparency

It’s important for businesses to understand what backs each token (e.g., cash, treasuries, other crypto) and how often those reserves are attested by independent auditors. USDC, for example, publishes regular reserve reports.

Regulatory posture

Businesses need to know how tightly a stablecoin is regulated and by whom. For example, USDC’s issuer, Circle, is subject to federal financial regulations, and Gemini Dollar (GUSD) is regulated by the New York State Department of Financial Services (NYDFS). This adds trust, especially for companies concerned with compliance exposure.

Liquidity and exchange support

If a coin trades on major crypto exchanges and moves billions in daily volume, there’s a built-in buffer against volatility. Liquidity also helps businesses enter or exit quickly without moving the market.

Technical resilience

Stablecoins run on smart contracts and blockchains. Businesses should look for a clean track record with no freezes, failed upgrades, or critical bugs. The infrastructure has to work under pressure as well as in ideal conditions.

Which stablecoins have demonstrated the strongest long-term stability?

Plenty of stablecoins are pegged at $1. Fewer have actually held that peg consistently, under pressure, and at scale.

The following three stablecoins have the strongest track record of stability.

USDC

USDC is issued by Circle, which is regulated in the US. This coin has proven consistently stable, with the price rarely straying by more than fractions of a cent. It’s primarily backed by cash and T-Bills, and it delivers monthly attestations. In 2023, when $3.3 billion in reserves were stuck at Silicon Valley Bank, USDC dipped to 86¢. But access was restored and the peg rebounded within a few days of the initial dip.

USDT

USDT is issued by Tether Ltd. and primarily funded by T-Bills, with a portion in other assets. The coin’s peg performance has historically been strong, and it releases quarterly attestations, but some reserve quality concerns remain. Its peg has held through liquidity events and redemptions of more than $10 billion during market crashes. In 2022, USDT dipped to 95¢ amid market stress but quickly rebounded back to $1.

DAI

DAI is issued by MakerDAO (a Decentralized Autonomous Organization, or DAO) and backed by overcollateralized crypto and tokenized real-world assets. All of those collateral balances are visible onchain. DAI has survived major events such as the 2020 market crash, and it has maintained its dollar peg with minor, short-term drifts. DAI is slightly more volatile under extreme conditions than fiat-backed stablecoins, but it’s resilient and decentralized.

How does market structure affect stability?

A stablecoin’s design and collateralization matter. But what really keeps it steady day to day is the structure around it. Market structure only works if people believe the system will hold.

Here are the mechanisms that fuel stability.

Redemption keeps the peg honest

The ability to redeem at $1 is a powerful stabilizer for asset-backed stablecoins. If the market price drops below a dollar, entities that hold a large amount of that stablecoin can buy at a discount and redeem for full value, pocketing the spread. That incentive pulls the price back up. The same works in reverse if a coin trades above $1: the issuer mints new tokens, sells at a premium, and drives the price back down.

Arbitrage does the daily work

Traders track prices across exchanges and buy or sell whenever a stablecoin drifts. It’s a self-correcting loop: the tighter the spreads and the faster the trades, the more stable the price looks to everyone else.

Liquidity is the cushion

The deeper the markets, the harder it is to move the price. USDT and USDC trade billions in value daily across dozens of exchanges and protocols. Their liquid reserves and redemption mechanisms keep the price stable, and that volume acts like another ballast. A consistent pool of active buyers and sellers creates dense order books, where buy and sell orders exist at many price levels close to the peg. As a result, even relatively large trades can be executed without significantly moving the price.

What risks remain even for the most stable cryptocurrencies?

Even reliable stablecoins can face challenges or risk. Here are issues you should watch for:

• Reserve exposure: Fiat-backed stablecoins hold their reserves in cash and Treasuries. But if those reserves are held at a failed bank or include risky assets, access can be temporarily disrupted.

• Redemption pressure: Stablecoins don’t have central banks or emergency liquidity lines. In a panic, mass redemptions can strain even fully backed issuers, especially if reserve assets can’t be liquidated quickly.

• Regulatory shifts: Global rules around stablecoins are changing fast. A stablecoin that’s compliant today could face new restrictions tomorrow.

• Technical failures: Smart contracts and cross-chain bridges can break. Bugs, downtime, or mismatched liquidity across networks can lead to temporary depegs.

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