Day 5 — Stablecoins, exchanges, and real-world uses
What stablecoins actually are, why they matter beyond speculation, and how to think about exchanges.
Most crypto coverage focuses on price charts. The most useful day-to-day applications of the technology, especially for people outside the United States and Europe, look much more like 'a way to send dollars internationally without paying a bank' than 'a way to get rich.' Today is about that side of the ecosystem.
A stablecoin is a token designed to hold a stable value, usually pegged 1:1 to the US dollar. The big two are USDT (Tether) and USDC (Circle), each holding tens of billions of dollars in reserves. They are not perfect — both have de-pegged briefly during stress events — but in normal conditions they move dollar-for-dollar with the actual dollar.
Stablecoins are useful because they combine the global reach of crypto with the price stability of fiat. Sending $500 of USDC to a friend in another country can settle in seconds for cents, where a bank wire might take days and cost $30. For people who live in countries with high inflation or strict capital controls, that is a real product.
Exchanges are companies that let you swap one crypto for another, or fiat for crypto. Centralised exchanges (Coinbase, Kraken, Binance) custody your funds and require ID. Decentralised exchanges (Uniswap, Jupiter) let you trade directly from your own wallet without giving up custody, but with more responsibility on your shoulders.
You should pick exchanges based on three things: are they regulated in your jurisdiction (check the FCA register in the UK, ESMA register in the EU, FinCEN in the US), have they had public security incidents and how did they handle them, and what is their withdrawal policy. We avoid any tool that is unregistered, anonymous, or refuses to publish a clear policy.
Example
In March 2023, Silicon Valley Bank failed over a weekend. Circle (the issuer of USDC) had $3.3 billion of reserves at SVB. USDC briefly traded as low as $0.87 against the dollar before the US government guaranteed SVB's deposits and the peg restored within ~48 hours. The lesson is not 'USDC is dangerous' — it is that even the most regulated, transparent stablecoin has dependencies on the traditional banking system that can cause stress.
Common mistakes
- Treating all stablecoins as equivalent. Fiat-backed, crypto-collateralised, and algorithmic stablecoins have very different risk profiles. Terra/UST (algorithmic) collapsed in May 2022 and wiped out $40 billion.
- Assuming a stablecoin's 'attestation report' is the same as a full audit. They are not. We cover the difference in the Stablecoins course.
- Choosing an exchange because a YouTuber said so. The YouTuber is usually paid. Check the regulator's register for your country.
- Leaving large amounts on any exchange longer than necessary. Self-custody is for long-term holdings. Exchanges are for trading.
Check your understanding
Why is USDT considered a stablecoin?
Key terms covered
Sources & further reading
- PrimaryCircle — USDC monthly attestation reports
Primary source for USDC reserve composition.
- PrimaryTether — Reserves report
Primary source for USDT reserve composition.
- SecondaryReuters — USDC depegs after SVB exposure (March 2023)
Contemporaneous reporting on the depeg event in the example.
We prioritise primary sources. Where a topic moves quickly (regulation, security incidents), we re-check sources on the cadence shown by the page's "Next review" date.