Stablecoin Purchase Guide: The Complete Manual for Beginners

Are you interested in stablecoins but hesitant because you don’t know how to choose or are worried about risks? In the world of cryptocurrencies, new concepts are emerging one after another, and especially for beginners, understanding the big picture can be challenging. This guide provides clear and practical information from the basics of stablecoins to how to purchase them.

What Are Stablecoins: The “Stable Version” of Cryptocurrencies

Stablecoins are cryptocurrencies designed to minimize price fluctuations by pegging their value to assets such as the US dollar or gold. Unlike the volatile swings seen in Bitcoin or Ethereum, they aim to maintain a near 1:1 ratio with the dollar.

They combine the advantages of cryptocurrencies—24/7 trading, high security on blockchain, fast transfers—with price stability.

Rapid Growth of Market Size

The stablecoin market has seen astonishing growth in recent years. By 2025, the total market capitalization is expected to reach around $300 billion, significantly up from the beginning of the year when it was in the $200 billion range. However, as of November 2025, the market is experiencing some adjustments on a monthly basis, indicating it is entering a phase of continued growth and market correction.

Four Types of Stablecoins You Should Know Before Buying

Stablecoins are classified based on “which assets they peg their price to.” Understanding the characteristics of each type is crucial before choosing how to buy.

Fiat-Collateralized: The Most Common and Reliable

Pegged 1:1 to fiat currencies like the US dollar. Reserves are managed by independent custodians and are regularly audited for transparency.

Major Stablecoins:

• Tether (USDT): Largest market size, supports multiple blockchains
• USD Coin (USDC): Emphasizes transparency and regulatory compliance
• Binance USD (BUSD)
• PayPal USD (PYUSD)

Commodity-Collateralized: For Investing in Gold or Silver

Linked to physical assets such as gold or silver. Behind these stablecoins are stored corresponding physical assets. Suitable for investors who want to hold digital assets backed by tangible commodities with small amounts.

Examples: Pax Gold (PAXG), Tether Gold (XAUt)

Crypto-Collateralized: For Advanced Investment Strategies

Use other cryptocurrencies like Bitcoin or Ethereum as collateral. To handle price volatility, they employ an over-collateralization approach, issuing stablecoins only when more than 1 dollar’s worth of crypto is deposited.

Example: DAI (issued by MakerDAO protocol)

Algorithmic: Innovative but Risky

Maintain price near $1 using automated algorithms that adjust coin supply based on price fluctuations without holding significant collateral assets. While technologically innovative, the collapse of TerraUSD (UST) in 2022, which wiped out about $45 billion, highlighted vulnerabilities in this type.

Example: Frax (FRAX)

Comparing Major Stablecoins: Which One to Choose?

Tether (USDT): The Market Leader

USDT is the largest stablecoin, with a market cap exceeding $180 billion as of November 2025. It accounts for about 60% of the entire market and is available on nearly all exchanges.

Basic Info:

• Launched: 2014
• Peg: US dollar (1 USDT ≒ 1 USD)
• Supported Chains: Ethereum, Tron, Solana, and others

In the past, there have been criticisms regarding reserve transparency, and in 2021, Tether was fined by the U.S. Commodity Futures Trading Commission (CFTC). Additionally, in November 2025, S&P Global downgraded the creditworthiness of its reserves to the lowest category (“weak”). Concerns include the increasing proportion of volatile assets like Bitcoin and corporate bonds backing USDT.

However, it remains widely used in Asia and Europe, maintaining a dominant market presence.

USD Coin (USDC): A Model of Transparency and Regulation

Issued by Circle, USDC emphasizes transparency and regulatory compliance. Its reserves mainly consist of cash and short-term U.S. Treasuries, with regular third-party audits published.

Basic Info:

• Launched: 2018 (a joint project of Circle and Coinbase)
• Market Cap: About $75 billion as of November 2025 (significantly increased from the start of the year)
• Features: Popular in North America, active in DeFi platforms

USDC is positioned as “payment infrastructure” aligned with the new US stablecoin regulations (GENIUS Act).

Other Notable Stablecoins

• DAI: A decentralized stablecoin created via MakerDAO protocol, maintaining peg through over-collateralization with Ethereum.
• Ripple USD (RLUSD): Designed for international remittances and institutional investors.

How to Buy Stablecoins: Step-by-Step Guide

Step 1: Open an Account on an Exchange

Access a major cryptocurrency exchange, input your basic information, and create an account. KYC verification may be required.

Step 2: Choose Deposit Method

Select “Deposit” in the “Assets” section, search for the desired stablecoin (e.g., USDT).

Step 3: Specify Blockchain Network

This is the most critical step. Ensure you select the same network for deposit and withdrawal:

• ERC20 (Ethereum network)
• TRC20 (Tron network)
• SOL (Solana network)

Choosing different networks can result in loss of funds.

Step 4: Generate Deposit Address

Click “Generate Address,” then copy the displayed address or scan the QR code.

Step 5: Transfer Funds from Another Wallet

Send stablecoins from another platform or wallet to the copied address. Transaction times may vary from minutes to hours depending on network congestion.

Benefits of Stablecoins: Practical Use Cases

Protecting Against Price Fluctuations

Converting assets into stablecoins during market downturns helps preserve value without fully exiting crypto. When markets recover, you can quickly re-enter positions, expanding trading strategies.

Innovative International Remittances

Traditional bank remittances take days and incur fees of 5-7% or more. Stablecoins can complete transfers in minutes at nearly the same cost. For example, remitting $200 from Sub-Saharan Africa can reduce costs by about 60%.

Financial Inclusion

In regions with limited access to banking or countries with high inflation, smartphones and stablecoins enable participation in the global economy.

Infrastructure for DeFi (Decentralized Finance)

Stablecoins are central to DeFi protocols, enabling:

• Lending and borrowing: earning interest via Aave, Compound
• Providing liquidity: forming key components of trading pairs
• Yield farming: earning returns by supplying liquidity
• Synthetic assets: backing derivatives of stocks, commodities

Expansion of Cross-Chain Use

Platforms are emerging that facilitate seamless transfer of stablecoins across different blockchains, accelerating the multi-chain era.

Risks and Challenges of Stablecoins: What to Know Before Investing

Regulatory Uncertainty

As stablecoins grow in importance, regulators are increasing oversight.

United States: Both the House and Senate are advancing legislation to establish guidelines for stablecoin issuers, including reserve requirements and transparency standards.

European Union: The Markets in Crypto-Assets (MiCA) regulation effectively bans algorithmic stablecoins and imposes strict reserve requirements on others.

Singapore & Hong Kong: Finalized frameworks for single-currency stablecoins pegged to G10 currencies, focusing on stability, capital adequacy, redemption, and disclosure.

Reserve Transparency Issues

Circle, issuer of USDC, regularly publishes proof of reserves, but not all issuers provide equivalent transparency. Lack of sufficient disclosure can expose users to fund risks.

Depegging Risks

The biggest crisis in stablecoins was the collapse of TerraUSD (UST) in May 2022, which lost about $45 billion in a week. This event exemplified vulnerabilities in algorithmic stablecoins.

Even fiat-backed stablecoins can temporarily lose their peg during market stress or if issuer solvency is questioned.

Risks from Centralization

Major stablecoins are issued by centralized entities, which pose risks such as:

• Address freezing or blacklisting
• Counterparty risk if the issuer goes bankrupt
• Loss of the core decentralized feature (“permissionless” nature) of cryptocurrencies

How Stablecoins Maintain Price Stability

Backed by Reserves

Fiat-collateralized stablecoins hold assets equivalent to the total issued amount in bank accounts or government bonds. When users redeem stablecoins, the corresponding fiat currency is returned.

Peg (Price Linkage) Maintenance Mechanisms

Maintaining a 1:1 peg (e.g., 1 USDT ≒ 1 USD) involves market mechanisms such as:

• User minting and redemption
• Arbitrage trading exploiting price deviations
• Over-collateralization in crypto-backed stablecoins
• Automated supply adjustments via algorithms

Even if the price temporarily deviates from $1, these mechanisms work to restore the peg.

Transparency and Auditing

Many issuers publish regular “proof of reserves” reports audited by third-party firms. The Bank for International Settlements (BIS) is discussing distinctions such as:

• Settlement stablecoins: Backed by highly liquid, safe assets like U.S. Treasuries, with no on-chain yield
• Operational stablecoins: Aimed at yield-generating investments

The trend favors settlement stablecoins that are fully backed by liquid, safe assets.

Post-Purchase Strategies for Stablecoins

Trading and Investment Use

Stablecoins serve as key trading pairs on crypto exchanges. Traders can enter and exit positions without converting to fiat, reducing fees and processing times. During volatility, they act as a “waiting position,” enabling quick re-entry when markets improve.

Everyday Payments and Commercial Transactions

Unlike Bitcoin or Ethereum, stablecoins maintain consistent purchasing power. Their value does not fluctuate significantly between transaction initiation and settlement.

International Remittances and Fund Transfers

Traditional bank remittances take days and are costly. Stablecoins can enable near-instant transfers within minutes. In high-inflation countries, converting local currency to dollar-pegged stablecoins preserves purchasing power.

Diverse Uses in the DeFi Ecosystem

Stablecoins are fundamental to DeFi, offering opportunities such as liquidity provision, collateral for protocols, and synthetic assets, enabling a wide range of financial activities.

Future Outlook for Stablecoins: Regulation and Technological Innovation

The stablecoin market is rapidly expanding from hundreds of billions to $3 trillion, becoming a crucial bridge between blockchain and traditional finance. Major institutions like PayPal, Bank of America, and Stripe are entering the space, strengthening its position.

Future Development Directions

Regional Diversification: New stablecoins tailored to specific economic needs of different regions

Clearer Regulatory Frameworks: International efforts to establish unified regulations, improving transparency and safety

Integration with Traditional Finance: Seamless connection with banking systems to lower barriers between crypto and conventional finance

Technological Innovation: Enhancing cross-chain interoperability and developing more scalable, efficient payment systems

Summary: How to Buy Stablecoins and Their Future Use

Buying stablecoins involves opening an account on an exchange, depositing funds, and selecting the appropriate network. However, network selection carries the risk of fund loss, so caution is essential.

Properly utilizing stablecoins can expand your options significantly—maintaining price stability while enabling efficient international remittances, participation in DeFi, and inflation hedging.

Given the rapid pace of change in this field, continuously staying updated and aligning your investment goals and risk tolerance with your stablecoin strategies is key to successfully navigating the digital financial era.