First Stablecoin appeared 2014, almost 5 years after Bitcoin.

Since then, it looks like stablecoins accelerated the growing of the cryptomarket, and the development of technology Blockchain.

These two charts tell a fascinating story about cryptocurrency’s most controversial invention. And they tell completely different tales.

If you’ve been following cryptocurrency news, you’ve probably heard the horror stories. Bitcoin crashing. Exchanges collapsing. Fortunes vanishing overnight.

But there’s something even more interesting happening beneath the surface — something that reveals both the incredible promise and the terrifying fragility of the entire crypto ecosystem.

**> It’s all about stablecoins.

**
What’s a Stablecoin? (The 30-Second Explanation)
Imagine you’re at a casino. Instead of betting with dollars directly, you chip up — trading your cash for colorful plastic tokens that represent fixed values. $1 gets you one chip. Always.

That’s essentially what a stablecoin is: a cryptocurrency designed to always be worth exactly $1 (or another stable asset). Unlike Bitcoin, which can swing 20% in a day, stablecoins are supposed to be boring. Predictable. Safe.

The two biggest players are USDT (Tether) and USDC (USD Coin), which together represent over $150 billion in value.

The Two Charts That Tell Different Stories
Researchers recently published a fascinating analysis of 10 years of stablecoin data. Two charts in particular caught my attention — and they reveal something counterintuitive.

Chart 1: The Roller Coaster (Total Value)

Chart 1. Source: Lambis Dionysopoulos, Andrew Urquhart, 2024
The first chart shows the total market value of all stablecoins from 2018 to 2024. It looks like a mountain range with dramatic peaks and valleys:

• 2020–2021: Explosive growth during the DeFi Summer and NFT boom
• May 2022: Sharp drop when TerraUSD collapsed
• November 2022: Another plunge after the FTX exchange imploded
• 2023–2024: Recovery and new highs

This chart tells a story of fear and greed. When crypto markets crash, people redeem their stablecoins for real dollars, and the total value shrinks. When markets are hot, people pour money in, and the value grows.

**> Pretty straightforward, right?

**
Chart 2: The Steady Climb (Number of wallets, possibilly bigger than Number of Users)
Now here’s where it gets weird.

The second chart shows the number of wallet addresses holding stablecoins over the same period. And unlike the roller coaster above, this chart has one dominant feature:

It almost never goes down.

While the total value crashed during TerraUSD and FTX, the number of people (or at least, wallets) holding stablecoins just… kept climbing. Steadily. Relentlessly. Up and to the right.

The Paradox

Think about this for a second:

• During crypto crashes, the total value of stablecoins drops (people are selling)
• But the number of wallets holding stablecoins increases (more people are buying)

**How is this possible?
**

It’s like watching a store during a fire sale: the total dollar value of inventory is dropping, but the number of customers in the store is growing. More people are buying, but they’re buying smaller amounts, or the big players are leaving while small players arrive.

The Real-World Examples: When Stablecoins Break

To understand why this matters, let’s look at two moments when stablecoins didn’t do what they were supposed to do — and the entire crypto market held its breath.

Disaster #1: TerraUSD (May 2022)
TerraUSD (called “UST”) was supposed to be worth $1. Always. But it used a clever — and ultimately fatal — algorithmic trick instead of holding real dollars in reserve.

In May 2022, it ost its peg.

What started as a $0.98 value quickly became $0.50, then $0.10, then essentially zero. $60 billion in value vanished in days.

The contagion was brutal:

• Bitcoin dropped from $40,000 to under $30,000
• Major crypto lenders (Celsius, Voyager) went bankrupt
• Thousands of jobs were lost

The lesson: When a stablecoin fails, it doesn’t just hurt stablecoin holders. It brings down the entire crypto market.

Disaster #2: USDC (March 2023)
USDC is considered one of the “safe” stablecoins, backed by real dollars in bank accounts. Or so people thought.

When Silicon Valley Bank collapsed in March 2023, it turned out that Circle (the company behind USDC) had $3.3 billion stuck inside SVB.

Panic ensued. USDC’s value dropped to $0.87— a 13% loss for something supposed to be rock-solid.

This time, the U.S. government stepped in and guaranteed SVB deposits, and USDC recovered. But the scare revealed something uncomfortable:

Even “safe” stablecoins depend on the traditional banking system. They’re not as independent or crypto-native as they appear.

Why More People Buy During Crashes
So why did the number of wallets keep growing even during these disasters?

**> Because stablecoins serve two very different purposes:> **

1. For traders: They’re a quick exit ramp. When Bitcoin crashes, you can instantly sell into stablecoins without waiting days to transfer money to your bank.

2. For newcomers: They’re an on-ramp. People in countries with unstable currencies or limited banking access see stablecoins as a lifeline — a way to hold dollars digitally, even when the crypto market is chaotic.

During crises, experienced traders might leave (reducing total value), but new users keep arriving (increasing wallet count). They’re betting that the crisis will pass, and they want to be ready.

The Bigger Picture: Crypto’s Achilles Heel
Here’s the uncomfortable truth that these charts reveal:

Stablecoins are simultaneously the most important and most fragile part of the crypto ecosystem.

They’re the bridge between traditional finance and crypto. They’re the trading pairs for almost all cryptocurrencies. They’re the foundation of “DeFi” (decentralized finance).

**But they’re also:
**

• Dependent on traditional banks (as SVB proved)
• Vulnerable to loss of confidence (as TerraUSD proved)
• Potentially subject to government regulation or shutdown

If stablecoins fail at scale, the entire crypto market goes down with them. Not maybe. Definitely. The question here would be ; how long coult it take to the cryptomarket to recupere?

**> What About Digital Currencies from Governments?

**
You might be wondering: “If stablecoins are so risky, why not just use a digital euro or digital dollar issued by a central bank?”

That’s a whole other conversation — and one that’s happening right now. The European Central Bank is developing a “digital euro,” and other countries are exploring similar ideas.

But here’s the key difference: a digital euro wouldn’t be a stablecoin. It would be the euro — just in digital form, with all the privacy concerns and government control that implies.

Stablecoins are private companies promising to hold dollars. While CBDCs (Central Bank Digital Currencies) are governments issuing digital money directly. They solve different problems and create different risks.

For now, stablecoins remain the crypto market’s preferred dollar substitute — for better and for worse.

**> What Should You Take Away?

**
If you’re new to crypto, here are the key lessons:

1. Stablecoins aren’t as stable as the name suggests. They can and do lose their peg.

2. Not all stablecoins are created equal. Algorithmic ones (like TerraUSD) are riskier than backed ones (like USDC), but even backed ones have counterparty risk.

3. The crypto market depends on stablecoins more than you think. They’re the plumbing that keeps everything running. When they break, everything breaks.

4. Growing adoption doesn’t mean growing safety. More wallets holding stablecoins doesn’t mean they’re safer — it just means more people are exposed if they fail.

The Bottom Line
Those two charts tell a story of an ecosystem in transition. Stablecoins are becoming more popular, more numerous, and more essential — even as they remain vulnerable to the very crises they’re supposed to help traders escape.

They’re crypto’s great paradox: the safe haven that isn’t entirely safe. The bridge to traditional finance that could collapse under its own weight.

As the market matures, something will have to give. Either stablecoins will become more regulated and secure, or they’ll remain the weak link that brings down the entire system.

Watch this space. The next stablecoin crisis isn’t a question of if — it’s a question of when.

— -

What do you think? Are stablecoins crypto’s killer app or its ticking time bomb? Drop your thoughts in the comments.

— -

Further Reading:

• Dionysopoulos, L. & Urquhart, A. (2024). “10 years of stablecoins: Their impact, what we know, and future research directions.” Economics Letters, 244, 111939.
• For a deeper dive into the TerraUSD collapse: “Anatomy of a Stablecoin Failure” (CoinDesk, May 2022)
• Understanding the SVB/USDC crisis: “How Silicon Valley Bank’s Collapse Shook Crypto” (Bloomberg, March 2023)

That’s all for now my friends!
Have a great learning journey!

Don’t forget: Engage, comment interact and we all grow here! (and hight probably you got some rewards!)
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