Top 5 Stablecoins: A Guide to the Best to Use

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Risk Warning: The Best Stablecoins

Before we delve into the top five stablecoins by usage, it’s important to note that using different types of stablecoins comes with inherent risks. Although stablecoins are intended to maintain a steady value compared to other cryptocurrencies, they are not entirely risk-free. It can be difficult to independently verify the claims regarding the collateralization, stable price, and backing of stablecoins. Therefore, investors must exercise caution and conduct thorough research before investing in them. Finally, we will reveal the most trusted stablecoin at the end.

Why a StableCoin?

On May 22, 2010, a Florida man spent 10,000 BTC for two pizzas from Papa John’s. Although this was recorded as the first-ever crypto transaction for an actual good, it now looks like a rather regrettable medium of exchange. Especially because 10,000 BTC equals millions of dollars now, buying those two pizzas wouldn’t be so regrettable for Laszlo Hanyencz today if he used a stablecoin to make the purchase.  

The crypto ecosystem has grown unprecedentedly in the past few years. Many factors have contributed to this enormous growth rate, including crypto’s decentralized nature. But if there was one thing holding people back, it has to be market volatility, and traditional stablecoins solve this problem. Continue reading to learn what a stablecoin is and the best stablecoins you could use. 

So, what is a Stablecoin?

Stablecoins are just like other types of digital currencies whose value is not or is less volatile. This means the popular traditional stablecoin’s value stays pegged to the value of an external factor, such as another fiat currency. This gives stablecoins the much-needed ‘stability’ as a store of value that a medium of exchange needs for transactions. 

The birth of the stablecoin has dramatically changed the crypto landscape. Previously, cryptocurrency users couldn’t hold crypto assets without worrying about their value falling. They had to convert crypto to fiat to hold them, and the conversion process can be costly and inconvenient. 

With stablecoins, you can hold your digital currencies within the crypto world with the stability of a fiat currency, bringing the best of both worlds to us. Plus, stablecoins are also readily accepted by some regulators and financial institutions in the financial market because stable values make it easier for an altcoin to stay compliant. 

Criticism of Stablecoins: Understanding the Skeptical Perspective

Despite their popularity, the stablecoin market faces significant criticism. Let us explore why some people and entities are skeptical about stablecoins, using the perspective of a well-known X influencer, Bitfinexed, as a case study. We made a video on stablecoins: Modern Finance or Next Bailout Crisis?

1. Transparency and Audit Concerns: Critics argue that without full, independent audits, it’s difficult to trust the claims of stablecoin issuers regarding their reserves. @bitfinexed has frequently highlighted these concerns, questioning the legitimacy of Tether Limited’s reserve claims.
2. Market Manipulation Allegations: There are allegations that some stablecoin issuers may influence the cryptocurrency market by issuing more tokens than their reserves can support.
3. Regulatory and Compliance Issues: Skeptics note that many stablecoins operate in a monetary policy gray area. The varying degrees of regulatory compliance among stablecoin issuers lead to concerns about their long-term stability and regulatory frameworks.
4. Centralization vs. Decentralization: commodity-backed stablecoins, on a blockchain network controlled by centralized entities, contradict the decentralized nature of traditional digital assets. Critics argue that this centralization introduces traditional financial system risks into the crypto space.
5. Economic Stability Risks: If something goes wrong with a big stablecoin, it could cause problems for lots of other digital currencies.
6. Reliance on Traditional Systems: Since stablecoins are often tied to everyday money like dollars, they can be affected by the same ups and downs, which might cancel out some benefits of using digital money.

Summary Criticism of Stablecoins

While stablecoins offer advantages, their criticisms – ranging from transparency to centralization – are crucial in shaping the future lessons around their role in the real-world assets ecosystem.

MiCA Impact (EU Stablecoin Regulation – 2024/2025)

The Markets in Crypto-Assets Regulation (MiCA), effective in the EU since June 30, 2024, introduces strict rules for stablecoin issuers. To remain available in the European Economic Area (EEA), issuers must obtain an EU license, maintain clear 1:1 fiat reserves, and meet transparency and audit requirements.

MiCA also enforces a 1 million transaction per day cap on non-euro stablecoins used for payments, limiting the scalability of tokens like USDT, DAI, and FDUSD in Europe. As a result, the best exchanges such as Binance, Bitstamp, and Uphold have begun delisting or restricting these assets for EEA users starting March 2025.

Only compliant stablecoins—like USDC (Circle Ireland), EURC (euro-pegged), and PYUSD (pending approval)—will continue full access in European markets. MiCA marks a shift toward regulated digital money, favoring transparent, fiat-backed models.

MiCA Compliance Checklist: What EU Users Need to Know

With MiCA enforcement in effect across the EU, only regulated stablecoins with licensed issuers can be offered to European users. Here’s a quick summary:

Always check your exchange’s availability by region, as support is evolving monthly.

A List of Top 5 Stablecoins by Market Capitalization

Enough definitions. Let’s dive into the five best stablecoins in the market without further ado.  

The 5 Best Stablecoins

1. Tether (USDT)

USDT is named Tether because it ‘Tethers’ or attaches itself to the US Dollar. Tether Limited Inc. was launched in 2014 under the name RealCoin, and at the time of the launch, Tether Limited stated that its value would always stay tethered to $1, making it a stable asset. Its market cap is currently $112 billion, and Tether Limited is known as the first stablecoin to enter the market, making it the largest stablecoin. This is also why Tether Limited must regularly report its USD reserves to prove it can stay pegged to the USD. 

Tether tokens are also known for their security and seamless integration with various crypto exchanges and wallets. According to Tether, it allocates equal dollar reserves whenever it adds Tether tokens into circulation, ensuring that the Tether tokens are backed by cash and equivalents.

Transparency: Tether Limited claims that all Tether tokens are pegged at a 1:1 ratio with the US Dollar. All Tether tokens are 100% backed by their reserves. Tether publishes the value of its reserves daily and updates them at least once a day. This has been a crucial role for Tether’s transparency claims.

Note: Despite Tether Limited representations on social media, the ‘reports’ do not meet the standards of formal digital assets audits. Tether has consistently failed to subject its claimed reserves to thorough scrutiny by an independent, unrestricted third-party auditor, perpetuating a significant track record of unfulfilled assurances.

2. USD Coin (USDC)

USD Coin is the second-largest stablecoin and one of the most popular Ethereum Blockchain (ERC-20 token) stablecoins in the crypto markets after Tether. Just like Tether, USDC is also pegged to the USD as $1. It’s much newer to the market, introduced in 2018, but it has quickly risen to the second-largest stablecoin. 

Its current tokens in circulation are $34 billion, and it operates on multiple blockchains, including the Ethereum Blockchain, Algoland, and Solana. USD Coin is backed by Coinbase as the central authority, which claims that the stablecoin has attained regulatory compliance. This stablecoin is not widely exchanged or accepted for payments and is increasingly used in decentralized finance.

Transparency: USDC claims it is fully backed by highly liquid USD reserves separately held from Circle’s operating funds. They issue holding reports regularly on all reserve assets and SEC filings. USDC also issues monthly attestations from Grant Thornton to ensure stablecoin reserves are always greater than USDC in circulation.

3. DAI

DAI is a decentralized stablecoin operating on the Ethereum blockchain as an ERC-20 token. Launched by MakerDAO in 2017, its goal is to maintain a value as stable as the US dollar. Unlike traditional fiat currencies, DAI is secured by other cryptocurrencies through the smart contracts of the Maker Protocol. This decentralized stablecoin setup enables it to bypass central authority, maintaining its dollar peg through community governance.

Stability is secured by Collateralized Debt Positions (CDPs), where users deposit crypto as collateral to mint DAI, aligning its value with the dollar. Its current market cap is equal to $5.3 billion, and its resilience to volatility makes DAI crucial for decentralized finance (DeFi) activities like lending and borrowing without relying on the reserve holdings of traditional financial institutions.

Transparency: DAI uses the Ethereum blockchain to make sure every transaction is visible to everyone, keeping things clear and honest. It works independently, without middlemen, and lets users be in control. With unique digital contracts, anyone can check all DAI activities, making them trustworthy.

4. Ethena (USDe)

Ethena (USDe) is a synthetic stablecoin designed for DeFi users, maintaining a $1 peg through a delta-neutral strategy—balancing staked ETH with short futures contracts. Unlike fiat-backed stablecoins, USDe doesn’t rely on traditional banking, offering decentralization and on-chain yield through its staking wrapper, sUSDe. It has rapidly grown to become a top-5 stablecoin by market cap. While offering attractive returns, USDe carries risks tied to smart contracts and market volatility. Ideal for crypto-native investors seeking non-custodial yield, USDe by Ethena is redefining how stablecoins work in decentralized finance.

5. First Digital USD (FDUSD)

First Digital USD (FDUSD) is a fiat-backed stablecoin issued by First Digital Trust, a Hong Kong-based financial firm. Unlike many competitors, FDUSD is regulated under the New York Department of Financial Services (NYDFS), giving it a high level of compliance and transparency. It has become Binance’s primary stablecoin since the phase-out of BUSD and now ranks among the top five stablecoins by market cap.

FDUSD is fully backed 1:1 with U.S. dollar reserves held in segregated custodial accounts and undergoes regular attestations. In 2025, it expanded beyond Ethereum and BNB Chain to launch on Solana, allowing for faster and cheaper stablecoin transactions across DeFi ecosystems. This cross-chain support strengthens its utility in decentralized finance, exchanges, and payment systems.

With strong institutional backing, regulatory oversight, and multi-chain availability, FDUSD positions itself as a secure and scalable stablecoin for users seeking stability, compliance, and performance.

Using Stablecoins

Using stablecoins, such as Tether (USDT), USD Coin (USDC), First Digital USD (FDUSD), or others, can be a strategic move for Cryptocurrency traders.

We have created a few guidelines and considerations for the effective and safer use of stablecoins:

1. Diversification Across Stablecoins: This helps reduce risk. Combining fiat-backed (USDC), decentralized (DAI), and synthetic options (USDe) can protect against platform failure, regulatory shifts, or depegs—ensuring more resilient liquidity management in your portfolio.
2. Risk Management: Stablecoins can provide a haven during periods of high volatility in the crypto market. Traders often convert a portion of their portfolio into stablecoins to reduce exposure to price fluctuations in more volatile cryptocurrencies.
3. Facilitating Trades: Stablecoins can act as a bridge between different types of cryptocurrency, allowing traders to move in and out of positions without returning to fiat currency. Depending on the trading platform and the pairings available, this can be more efficient and sometimes more cost-effective.
4. Hedging Against Fiat Inflation: Some traders use stablecoins as a hedge against inflation in their local fiat currency, especially if the stablecoin is pegged to a more stable currency like the US dollar.
5. Liquidity and Market Access: Stablecoins often provide better liquidity than other cryptocurrencies, especially in various trading pairs. This liquidity is crucial for executing trades efficiently and entering or exiting positions without significant slippage.
6. Yield Farming and Staking: Some stablecoins can be used in decentralized finance (DeFi) platforms for yield farming or staking, offering potential returns through interest or rewards. However, this comes with its own set of risks and requires a thorough understanding of the protocols involved.
7. Yield-Bearing Stablecoins: like sUSDe (Ethena) and PYUSD (PayPal) allow users to earn passive income while holding a stable asset. PYUSD offers up to 3.7% APY to U.S. users, while sUSDe earns through ETH staking and derivatives. These options blend yield with stability, ideal for on-chain income seekers.
8. Understand the Risks and Backing: Before using a type of cryptocurrency stablecoin, research its backing and stability mechanisms. Understand if it’s collateralized (and how), algorithmically stabilized, or Fiat-backed stablecoin, or if other factors might affect its stability.
9. Compliance with Regulations: Ensure that any activity with stablecoins complies with local regulations. Be aware of reporting requirements, especially when converting between cryptocurrencies and fiat currencies.
10. Platform Security: Use respected crypto exchanges or platforms with strong security measures to minimize the risk of hacking and theft.
11. Algorithmic & Hedged Stablecoins: such as USDe don’t rely on fiat reserves. Instead, they use a delta-neutral approach—balancing long ETH and short futures—to maintain a $1 peg. They’re innovative and decentralized, but carry smart contract and depeg risks under volatility.
12. Proof-of-Reserve Transparency: It is crucial for trust. Stablecoins like USDC and TUSD offer real-time dashboards showing 1:1 reserves via Chainlink or similar oracles. Always favor stablecoins with public audits and live asset verification to ensure true backing.
13. Have an exit strategy: Especially in turbulent market conditions, have a clear plan for when and how to convert stablecoins either back into other cryptocurrencies or into fiat.
14. Stay Informed: The cryptocurrency market and the regulations governing it are constantly evolving. Staying informed about the market, real-world assets, and regulatory environment changes can help make better decisions.

Crashed Stablecoin – TerraUSD (UST) renamed to Terra Classic (USTC)

TerraUSD, an algorithmic stablecoin native to the Terra blockchain ecosystem, boasted a market cap of $9.1 billion at the time of the original article’s publication. However, it crashed in May 2022, plummeting to a market cap of $290 million. As of 2023, its market capitalization has declined to $105 million, marking an all-time high (ATH) drop of 99%. People asked: Was TerraUDS not a Fiat-backed stablecoin? According to Terra’s white paper, its underlying protocol relied on a dual-coin system that was not fully backed by traditional collateral.

This coin’s defining features were scalability, interchain usage, and interest rate accuracy. As the name suggests, and like all other stablecoins we have discussed, UST was, too, pegged to the US$1. But it lost its peg, and its once-stable price fell to $0.02 in 2022. As of 2023, the price of USTC has further decreased to $0.01.

Bottom Line

The best stablecoins might not make you much money like other investments, but they are perfect for trading in the crypto world. Tether Limited (USDT) is the most used stablecoin by market capitalization because many people use it to buy and sell cryptocurrencies. However, the USDC is often seen as the most trustworthy. The company behind USDC, Circle, is very good at following financial rules and being open about its backing and holdings. With stablecoins, you can enter the world of cryptocurrencies more confidently, enjoying less price instability and market volatility. But never forget, when using centralized stablecoins, why cryptocurrencies were created:

To offer a decentralized alternative to traditional, centralized financial systems!

Frequently Asked Questions