Crypto is volatile. That's the whole point for traders. But you can't keep all your money on a roller coaster at all times. Sometimes you need to park cash, move funds between platforms, or just sit on the sidelines without converting back to a bank account. That's what stablecoins are for. They're the most boring part of crypto, and they make everything else work.
What Is a Stablecoin?
A stablecoin is a cryptocurrency designed to hold a steady value, usually pegged to $1 USD. While Bitcoin and Ethereum can swing 5-10% in a day, a stablecoin aims to stay at exactly $1.00 — or as close to it as possible.
They're the bridge between traditional money and the crypto world. Need to deposit funds on a trading platform? You're probably using a stablecoin. Want to lock in profits after a trade without cashing out to your bank? Move to a stablecoin. Need to send money to someone instantly, anywhere in the world, without a wire transfer? Stablecoin.
The three biggest are USDC, USDT (Tether), and DAI. They all target a $1 peg, but they work very differently under the hood.
USDT (Tether)
USDT is the biggest stablecoin by market cap and trading volume. It's everywhere. Pretty much every exchange, every trading pair, every DeFi protocol supports it.
How it stays at $1: Tether (the company) says it holds reserves — a mix of cash, cash equivalents, Treasury bills, and other assets — that back every USDT token in circulation. You give them $1, they mint 1 USDT. You redeem 1 USDT, they give you $1 back. The peg holds because you can always (in theory) swap it back at par.
The controversy: Tether has been dogged by questions about whether their reserves are really there and what exactly they're invested in. They've settled with regulators, been fined, and faced years of skepticism. In recent years, they've started publishing reserve attestations and shifted more heavily into U.S. Treasury bills. The scrutiny hasn't gone away, but USDT continues to dominate.
Why people use it anyway: Liquidity. USDT has the deepest trading pairs on almost every platform. For traders, that means tighter spreads and less slippage. The practical reality is that USDT works, and it's accepted everywhere.
USDC
USDC is the second-largest stablecoin and has positioned itself as the "compliant" alternative to Tether.
How it stays at $1: Circle (the company behind USDC) holds reserves in cash and short-term U.S. Treasuries. Every USDC is backed 1:1 by reserve assets. Circle publishes monthly attestation reports from a major accounting firm, so there's more transparency into what's backing the supply.
The 2023 depeg: USDC briefly dropped below $1 in March 2023 when Silicon Valley Bank collapsed. Circle had about $3.3 billion in reserves at SVB. When the bank went down, people panicked and sold USDC. It dipped to around $0.87 before recovering after the government stepped in to guarantee SVB deposits. It was a stress test that exposed the risk of holding reserves in the banking system.
Why people use it: Transparency, regulatory compliance, and the fact that a lot of on-chain platforms and DeFi protocols prefer it. If you're trading or holding on-chain, USDC is often the default.
DAI
DAI is the odd one out. It's not issued by a company. It's created by a smart contract protocol called MakerDAO (now called Sky).
How it stays at $1: DAI is overcollateralized. To mint DAI, you lock up crypto (usually ETH or other approved assets) worth more than the DAI you're creating. If you want 1,000 DAI, you might need to lock up $1,500 worth of ETH. If the value of your collateral drops too far, the protocol liquidates it to keep DAI backed. The peg is maintained through these collateral ratios and a system of incentives that expand or contract the DAI supply.
The appeal: DAI is decentralized. No company controls it. No one can freeze your DAI or block your transactions. For people who care deeply about censorship resistance and self-sovereignty, DAI is the stablecoin that aligns with those values.
The tradeoff: It's more complex, it has lower liquidity than USDC or USDT, and the peg can wobble during extreme market volatility since it depends on crypto collateral rather than dollars in a bank.
Side-by-Side Comparison
Backing: USDT and USDC are backed by real-world assets (cash, Treasuries). DAI is backed by locked-up crypto.
Issuer: USDT is issued by Tether. USDC is issued by Circle. DAI is issued by a smart contract protocol with no central company.
Transparency: USDC publishes monthly attestations. Tether publishes quarterly reports. DAI's collateral is visible on-chain in real time — anyone can audit it.
Censorship resistance: Both USDT and USDC can freeze tokens at specific addresses (and have done so). DAI cannot be frozen by any single entity.
Liquidity: USDT has the most, followed by USDC. DAI has the least of the three but is still widely supported.
Peg stability: All three have held their peg well under normal conditions. USDC had its SVB scare. DAI can wobble during crypto crashes. USDT has maintained its peg through multiple market cycles despite ongoing controversy.
Which One Should You Use?
Depends on what you're doing.
For trading: USDC and USDT are both solid choices. Most platforms support both. Check which one has deeper liquidity on the pairs you trade.
For on-chain activity: USDC is the standard on most DeFi protocols and on-chain platforms. If you're trading on platforms built on decentralized infrastructure, USDC is usually the primary option.
For decentralization purists: DAI. No company, no freeze risk, fully on-chain collateral. But you sacrifice some liquidity.
Most active traders hold both USDC and USDT. Having access to both gives you flexibility across platforms without needing to swap constantly.
Why Stablecoins Matter for Trading
Stablecoins aren't exciting. They don't moon. But they're the plumbing that makes crypto trading possible.
Your margin on a perps trade? Denominated in stablecoins. Your PnL when you close a position? Settled in stablecoins. Moving funds between platforms? Stablecoins. Taking profit without selling to fiat? Stablecoins.
Understanding which ones exist, how they work, and which ones you can trust is as fundamental as understanding the trades themselves.
Trade with USDC or USDT on Liquid
Liquid accepts both USDC and USDT as deposit currencies. Fund your account with whichever you prefer and start trading perps across crypto and equities.
- Download the app. Head to tryliquid.xyz and grab Liquid from the App Store or Google Play.
- Create your account. Sign up with email or connect a wallet. Your assets stay on-chain, in your control.
- Deposit USDC or USDT. No waiting periods. No T+1 settlement. Your funds are ready immediately.
- Trade crypto and equities. BTC, ETH, AAPL, TSLA, and more — all available 24/7 from one interface.
- Earn points. Every trade earns points through Liquid's points program.