Stablecoins Explained: Inside a $290 Billion Market
Roughly $290 billion sits in stablecoins right now. That is more than the entire market capitalisation of Ethereum, and it moves through exchanges, remittance corridors and DeFi protocols every day with almost none of the attention that Bitcoin gets. Stablecoins are the plumbing of the crypto market, and plumbing only gets noticed when it fails. This guide explains what they are, how they actually stay stable, where the risks hide, and why the most interesting stablecoin story of 2026 came out of Tel Aviv.
Thank you for reading this post, don't forget to subscribe!What a stablecoin is
A stablecoin is a blockchain token designed to hold a constant value against something else, almost always the U.S. dollar. One USDT should always be worth one dollar. That sounds trivial until you remember why it exists: Bitcoin moved 4.4% in a single overnight session this week, opening Wednesday at $64,974.75 after a soft U.S. inflation print, while Ethereum jumped 6.6% to $1,889.97 and traded near $1,920 on Thursday. You cannot price a salary, an invoice or a loan in an asset that does that. Stablecoins are how crypto gets a unit of account without leaving the blockchain.
The practical uses stack up quickly. Traders park in stablecoins between positions rather than cashing out to a bank. DeFi lending markets denominate loans in them. Workers in countries with unstable currencies hold them as informal dollar accounts. And exchanges use them as the default trading pair, which is why most price charts you look at are quoted against USDT rather than against dollars.
The three ways to hold a peg
Not all stablecoins work the same way, and the mechanism is the whole risk profile.
| Type | How the peg holds | Main risk | Examples |
|---|---|---|---|
| Fiat-backed | An issuer holds cash and short-term treasuries and redeems 1:1 | You are trusting the issuer and its auditor | USDT, USDC, BILS |
| Crypto-collateralised | Over-collateralised with on-chain assets, liquidated automatically if cover falls | Sharp crashes can outrun liquidations | DAI |
| Algorithmic | Code mints and burns supply to chase the peg, with little or no reserve | Reflexive collapse; the model has failed repeatedly | Largely abandoned since 2022 |
The market has voted decisively. Fiat-backed stablecoins dominate, and the concentration is extreme: Tether (USDT) carries roughly $184.1 billion and about 63.3% market share, USD Coin (USDC) around $73.3 billion, and between them they account for 88.5% of the entire stablecoin market. Every other stablecoin combined fights over the remaining eleven percent.
That concentration is the honest answer to “are stablecoins safe.” A fiat-backed stablecoin is only as sound as the reserves behind it and the quality of the attestation proving those reserves exist. It is a trust product wearing a trustless costume. That is not a reason to avoid them, but it is a reason to know which one you hold and who audits it.
Why the balance grew while the market fell
Stablecoin supply is one of the more useful sentiment gauges available, and it has been telling a specific story. Global crypto market capitalisation is around $2.22 trillion, well off its highs, with Bitcoin dominance near 58.5%. Yet the stablecoin float has held up and grown through the drawdown, with different trackers putting the total between roughly $290 billion and $321 billion depending on methodology and date.
Money that leaves a volatile position and stops in a stablecoin has not left crypto. It has moved to the sidelines while staying on-chain. That is the same dynamic we traced in DeFi’s $70 billion reset: capital drained out of yield-bearing protocols and parked in dollars without ever touching a bank. A rising stablecoin balance during a bear market is dry powder. It is also, less comfortably, a measure of how much of crypto’s liquidity is ultimately a claim on U.S. treasuries.
The regulatory turn
Stablecoins have moved from regulatory afterthought to headline concern, precisely because they got big enough to matter to central banks. Europe’s MiCA regime now imposes reserve and reporting obligations on issuers. California’s Digital Financial Assets Law requires licensing for digital asset business activity with state residents. And the SEC’s July rulemaking agenda includes proposals touching custody and tokenised securities that will inevitably brush against stablecoin infrastructure.
Then there are the sovereign experiments. Bolivia’s economy minister said on July 13 that the government is exploring how USDT could operate alongside the boliviano and the dollar through local banks and digital wallets. A country considering a privately issued token as semi-official monetary infrastructure would have been unthinkable five years ago. It is now a policy option.
The Israeli angle: BILS and the digital shekel
The Israel blockchain ecosystem produced the most instructive stablecoin case of the year. In April 2026, Israel’s Capital Market Authority approved BILS, a token pegged 1:1 to the new shekel and issued by Tel Aviv-based Bits of Gold. It runs on Solana, uses Fireblocks for custody, and is audited by EY. It cleared a two-year evaluation and pilot inside a regulatory sandbox before launching in limited format at a predetermined scale under strict supervisory conditions.
Two details make BILS worth studying. First, it is the first government-approved fiat-backed stablecoin in the Middle East, which gives Israel a live, supervised template while larger jurisdictions are still drafting. Second, it is not pegged to the dollar. Almost the entire $290 billion stablecoin market is a dollar market, which means most stablecoin users outside the United States are taking on currency exposure they may not want. A shekel-pegged token is a small answer to a large structural problem in Web3: on-chain money currently means American money.
Running alongside it, the Bank of Israel’s digital shekel project published a 2026 roadmap and intends to bring a launch recommendation to the Governor by year-end, with a preliminary two-tier retail and wholesale CBDC design at 1:1 shekel parity. The central bank has also signalled that it now views stablecoins as systemically relevant rather than a curiosity. Israel is therefore running the private and public versions of digital money at the same time, in the same small market, which will make it an unusually clean natural experiment.
How to hold them sensibly
Three practical points. Know the issuer and read who attests to the reserves. Do not treat a stablecoin balance on an exchange as equivalent to a bank deposit, because it carries both issuer risk and exchange risk stacked on top of each other. And if you hold meaningfully, understand your wallet and self-custody options rather than leaving everything with a counterparty. More context on the mechanics sits in our DeFi coverage.
Stablecoins solved crypto’s most boring problem and became its most important one. A $290 billion market where two issuers control 88.5% of supply, most of it denominated in a currency most holders do not natively use, is not a finished system. It is an early one that happens to work.
For Hebrew-language coverage, visit coindex.co.il. Portuguese readers can find similar analysis at coindice.com.br.
This content is for informational purposes only and does not constitute financial advice.
Open your MEXC digital wallet and get exclusive deposit bonuses. Over 1,700 digital currencies available!
🔗 Open a Free MEXC AccountAffiliate link • Sign up in seconds
