In the dynamic world of cryptocurrencies, not all digital assets behave in the same way. While Bitcoin, Ethereum, and other traditional cryptocurrencies are characterized by high volatility and significant price fluctuations, stablecoins aim to combine the speed, transparency, and accessibility of blockchain technology with the price stability of traditional fiat currencies, such as the US dollar or the euro. Below, we outline the key differences between stablecoins and traditional cryptocurrencies.
Issuance of each asset type
Traditional cryptocurrencies are decentralized and typically have specific issuance limitations. For instance, Bitcoin has no central issuing authority; new units are created as a “reward” for those who add a valid block to the blockchain, and no single company determines how many units are produced. Consequently, trust rests in the protocol’s rules and the network of participants who validate them, ensuring no one can create units outside the established framework or unilaterally alter those rules.
In contrast, stablecoins (such as USDC or USDT) are backed by an identifiable company. For example, Circle issues USDC, while Tether manages USDT. Trust in stablecoins shifts to the issuer, which holds the funds backing each unit and sets the terms for redemption.
Pegging versus market price
The price of Bitcoin (BTC) or Ethereum (ETH) is determined by supply and demand, so it can rise or fall drastically within hours. Stablecoins (such as USDC or USDT), however, maintain a peg to the US dollar because the issuer commits to redeeming each unit for one US dollar; thus, their value is tied to the currency that backs them. In other words, someone who holds 1,000 USDC or USDT for a month will, at the end of that period, still possess the equivalent of 1,000 US dollars.
Conversely, if that same amount is held in Bitcoin or Ethereum, its value could be higher or lower, depending on market movements during those weeks. This level of price stability is why stablecoins are so popular and highly useful for making payments and conducting commercial transactions.
Reserves backing each unit
Unlike Bitcoin—which has no reserves and derives its value from a limited supply (just under 21 million units)—a stablecoin requires real-world assets to back every unit in circulation. For instance, with USDC, most reserves are held in the Circle Reserve Fund, a money market fund that invests in cash and short-term US Treasury bills. The remainder of the reserve is held as cash, distributed primarily across some of the world’s largest banks.
Furthermore, issuers publish periodic reports on these reserves (Circle does so monthly, and Tether quarterly), allowing any user to verify the backing before choosing a stablecoin. Bitcoin, by contrast, requires no such documentation, as every node on the network ensures that no more units are created than the protocol allows.
Operating networks and transaction fees
Bitcoin is the native currency of its own blockchain, whereas a stablecoin functions as a token issued on top of an existing network. For example, USDC circulates on the Solana network as an SPL-standard token issued directly by Circle; on that chain, every transaction incurs a fee paid in SOL (Solana’s native currency).
This means that anyone sending stablecoins must also maintain a small balance of the network’s native cryptocurrency, as the transaction cannot be processed without it. On networks like Solana, this cost is typically a fraction of a cent and has a negligible impact on the total transfer amount. Even so, always confirm the recipient is using the same network, as a stablecoin can exist on multiple chains and each transfer must run on the corresponding network.
Conversion to fiat currency
For stablecoins, direct redemption with the issuer is generally reserved for institutional clients. For instance, in the case of USDC, the issuer—Circle—facilitates this through its platform, Circle Mint. Meanwhile, Tether sets a minimum threshold of $100,000 per transaction for USDT. Consequently, those dealing with smaller amounts typically turn to exchanges or specialized providers to convert USDT into dollars, which they then deposit into a bank account (based on 1:1 parity).
With a traditional cryptocurrency, the process requires first “selling” the asset at the current market price, meaning the final amount is only known when the sale is executed. With a stablecoin, you can calculate the amount to be received in advance—after deducting the intermediary’s fee—which offers greater predictability.
Typical use of each asset
Traditional cryptocurrencies originated as exchange systems without intermediaries. Consequently, assets like Bitcoin are often associated with the concept of a “store of value” because of their limited supply, while Ether is typically used to pay fees on the Ethereum network. Stablecoins, by contrast, let users send and receive funds at any time without exposure to crypto market volatility. If Bitcoin were used for a scheduled payment, the recipient would be exposed to market fluctuations, which could significantly alter the transaction value and negatively impact the commercial operation. For this reason, many companies and businesses prefer to make payments using stablecoins (such as USDT or USDC) rather than traditional cryptocurrencies (like Bitcoin or Ethereum).
What are your thoughts on this topic? Are there any other differences between stablecoins and traditional cryptocurrencies that haven’t been mentioned?
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