Unit 4 · Level 3 · Crypto Deep-Dive
Stablecoins: crypto's cash
Stablecoins (USDT, USDC and others) are tokens designed to hold $1 of value: crypto's cash. Traders park profits in them between trades, price everything against them, and move dollars across the world in seconds. They're the plumbing of the entire crypto market.
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What you get asked
Why do traders 'go to stables' instead of cashing out to a bank?
While sitting out volatility. 'Flat' in crypto usually means 'in stables'. Your not-trading skill from last unit lives here: flat, but one click from action.
Match the stablecoin design to its backing
Design = risk profile. Fiat-backed depends on the issuer's reserves being real; algorithmic designs have famously collapsed.
2022 history: TerraUSD (UST), an algorithmic stablecoin, 'depegged' and collapsed to near zero, taking ~$40B with it. The lesson?
Know what backs your stablecoin. UST's 'stability' rested on a reflexive mechanism that unwound in days. Billions parked in it as 'cash' evaporated. Even your cash position deserves due diligence.
When a stablecoin trades meaningfully below $1, traders say it has ___.
Small wobbles (fractions of a cent) are normal market noise. A deep, persistent depeg is a fire alarm, and a lesson in what 'backing' really meant.
Practical wisdom: holding meaningful savings in stablecoins long-term means accepting…
For zero upside; real long-term savings deserve safer rails. Stables are working capital, not a vault. Trade with them, bridge with them, but 'risk-free' they are not. 🐜
The rest of this unit
CEX vs DEX, stablecoins, yield forensics, and narrative cycles: fluent crypto, kept skeptical.