Best Stablecoins, Rated and Reviewed for 2024

 

Key Takeaways:

• Stablecoins are great for traders or investors who need to “hold value” in a digital asset without cryptocurrency’s volatile price swings.
• Stablecoins offer new ways of earning interest (a.k.a. “yield”) at a time when traditional savings vehicles provide next to nothing. (See our page on Best Stablecoin Interest Rates.)
• Our top stablecoins, based on trust and reliability, are USDC, USDT, DAI, and TUSD.

One of the major concerns that investors have over crypto is its volatility.

To remedy that problem, developers and investors have worked to create more resilient tokens to counter that volatility. The most successful are stablecoins–crypto assets backing a token with another asset (gold, fiat currency, etc.) to modulate price fluctuations and provide investors with an option that isn’t as risky as an untethered alternative.

In this piece, we’ll cover our list of the best stablecoins and how savvy investors can use stablecoins to help build wealth.

Top Stablecoins by Supply

To give you a visual of how the stablecoins stack up against each other, here’s a look at the top four that dominate supply. The supplies of USDT, USDC, FDUSD, and DAI get distributed between multiple host blockchains.

 

Let’s look closer at the fundamentals and the teams behind each stablecoin on our shortlist:

Top Global Stablecoins

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USD Coin: Backed 1:1 with USD

The USD Coin was developed by the Centre Consortium, founded by Circle, a peer-to-peer payments company based in Boston, Massachusetts. In August 2023, Circle and Coinbase closed the Centre Consortium, resulting in Circle gaining full governance of USDC.

Each USDC token has a corresponding $1 U.S. as cash or equivalent invested in an owned account. Decentralization is ensured by allowing numerous projects to join a network of USDC issuers overseen by the Circle project. Each of these maintains its cash reserves to stabilize the tokens it issues.

A new coin is created whenever someone buys or acquires USDC via currency conversion. When this happens, it is matched by an equal amount of US dollars deposited in independent currency reserves, either as cash or short-term US treasuries.

USDC is the backbone of Circle’s global payments service. As of 2023, the company was valued on private markets at $9 billion. Due to its popularity and utility, USDC interest rates can go as high as 15% APY on specific platforms.

• Click for our USDC Investor Scorecard

• Click for our USDC Risk Scorecard

We gave USDC our highest score of 5.0 due to its high market cap and the solid team behind Circle. As of this writing, USDC is available on 16 blockchain networks, with more expected in the coming years. The coin's total circulating supply also improved to $32 billion in 2024 from its low of $23.9 billion in December 2023. BMJ Score: 5.0

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USDT: Dominant Stablecoin Supply

Tether is one of the earliest stablecoins, launched in 2014 – 2015. Tether is owned by iFinex Inc., a Hong Kong-based company that also owns Bitfinex, one of the largest crypto exchanges in the world.

On paper, Tether is pegged to the US Dollar in a 1:1 ratio, with cash and cash equivalent reserves fully collateralized. US authorities have questioned the validity of these claims, stating that the company sometimes does not hold enough cash/cash equal dollar reserves.

However, the token has maintained a stable 1:1 peg with the US dollar. USDT interest rates have also grown significantly, often reaching double-digit APYs.

Recent filings indicate that Tether’s collateral includes a low percentage of actual cash reserves (around 0.11%), with most reserves in US treasury bills (79.88%) and the rest being in bitcoin, gold, and other investments.

Despite the positive numbers, numerous controversies have plagued Tether over the years. The Paradise Papers financial data leak revealed potentially illegal links between Tether and the Bitfinex exchange. Since then, there have been numerous controversies surrounding Tether’s ownership and management, with allegations of market manipulation and false advertising.

• Click for our USDT Investor Scorecard

• Click for our USDT Risk Scorecard

We gave Tether a score of 4.5 due to its long-running reliability, controversies notwithstanding. In May 2024, Tether published its Q1 2024 attestation report, revealing healthy token reserves of $110.29 billion, a surplus of $6 billion, and profits of $4.52 billion. BMJ Score: 4.5

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DAI: The Algorithmic Stablecoin

Dai is an Ethereum-based stablecoin managed by MakerDAO and developed by the Maker Foundation. The team was created by founder Rune Christensen in 2014 as a decentralized autonomous organization or DAO.

MakerDAO membership is limited to owners of MKR, the project’s governance token. Members vote to decide the parameters and future roadmap of the DAI stablecoin.

Unlike other asset-backed stablecoins, Dai is not pegged to US dollars or gold. However, it still aims to keep its value pegged at 1:1 to the US dollar through a system of Ethereum smart contracts. To create Dai tokens, users must purchase and stake an equal value (in US dollars) of Ethereum tokens.

Ethereum volatility severely affected Dai’s stability in 2020. As a result, MakerDAO has shifted much of its reserves to USD Coin, one of the most popular stablecoins in terms of market cap. Each Dai token is backed by 62% USDC and 29% ETH.

• Click for our DAI Investor Scorecard
• Click for our DAI Risk Scorecard

We gave Dai a score of 4.0, as algorithmic-backed stablecoins inherently hold more risk than fully-collateralized stablecoins. The MakerDAO project behind the stablecoin is also undergoing major changes, with two stablecoins (NewStable and PureDAI) planned to replace Dai. BMJ Score: 4.0

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First Digital USD: Fastest Growing Stablecoin

Introduced in June 2023, First Digital USD is issued by FD121 and backed by the US dollar (or assets of an equivalent value) held in reserves with First Digital Trust Limited, its appointed custodian. FDUSD was issued on both BNB Chain and Ethereum at its launch, and it plans to expand to other blockchains.

Its trust company, First Digital Trust Limited, is mandated by Hong Kong law to keep all FDUSD reserves in its accounts, meaning there is no co-mingling with other assets.

Additionally, Hong Kong law requires that the reserves be held in cash and high liquidity assets, which First Digital claims to help ensure the 1:1 backing of FDUSD.

We gave FDUSD a lower score of 3.5, simply because it does not have the track record or reputation of other stablecoins on our list. In April 2024, the market cap peaked at $4.4 billion before falling to $3 billion, making it the fourth largest stablecoin by market cap.

The coin has experienced rapid adoption since Binance eliminated trading fees and made FDUSD a prominent stablecoin on the popular exchange. BMJ Score: 3.5 

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USDP: Leading Fully Regulated Stablecoin

Pax Dollar, previously known as Paxos Standard or PAX, is a stablecoin launched by Paxos Trust Company. Based in New York, Paxos is a fintech company specializing in blockchain services, including cryptocurrency brokerage, asset tokenization, and asset settlement.

The team backing Paxos has a wealth of expertise from tech and finance backgrounds. The stablecoin itself is asset-backed, with reserves of US Dollars held in a 1:1 ratio.

The stablecoin fully complies with the New York state financial service laws. Independent monthly audits validate the reserves. It is a relatively low-risk stablecoin, overshadowed by bigger alternatives like USDC and Binance USD.

• Click for our USDP Investor Scorecard

We gave USDP a score of 3.0 due to its high standards regarding consumer protection. The stablecoin is subject to strict regulatory oversight by the New York State Department of Financial Services. Its reserves are held in cash and cash equivalents, meaning its customer funds are reportedly safe and available for redemption at any time. BMJ Score: 3.0

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TUSD: Built for the New Global Payment System

True USD is another dollar-backed stablecoin with collateral held in a 1:1 ratio. Launched in 2018, the crypto resides on TrustToken, a platform designed to create various asset-backed tokens. TUSD is one of the several cryptos launched by the TrustToken team.

The young team behind this project boasts some of the most impressive technology names in the field, albeit with limited financial experience. The company has its headquarters in San Francisco, California.

Actual USD reserves are held in an escrow account by third parties. Qualifying institutions can participate in the True USD system, eliminating the need for trust in a central project (albeit replacing that with trust in third-party accounting).

In January 2024, the stablecoin briefly depegged and dropped as low as $0.926 on certain exchanges. This was triggered by the exclusion of the stablecoin from Binance’s popular staking pools and concerns regarding security and potential under-collateralization.

We gave TrueUSD a BMJ score 2.5 due to its recent struggles related to depegging and reliability concerns. Since the beginning of 2024, the stablecoin’s market cap has fallen from $3 billion to just $500 million.  BMJ Score: 2.5

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GUSD: A Secure Stablecoin

Gemini USD is a stablecoin launched by the Gemini Trust Company, a cryptocurrency exchange based in New York City. Tyler and Cameron Winklevoss, well-known bitcoin billionaires and tech entrepreneurs, founded Gemini.

In early 2022, Gemini was one of the largest regulated cryptocurrency firms in the world, with a total valuation of $7 billion and employing over 1,000 people.

However, the company that also runs the Gemini exchange fell on hard times with the crypto market crash in 2022. The implosion of FTX, in particular, affected thousands of customers using the company's Earn lending program.

In 2024, Gemini settled with regulators and agreed to pay $1.1 billion to Earn customers. While the exchange still has plenty of users, the fallout from the FTX-Earn crisis has likely affected Gemini’s ability to draw new customers.

The GUSD is backed 1:1 by real dollars in reserve, with monthly audits conducted by reputed accounting firms. One of the first stablecoins to get regulatory approval in the US, Gemini USD was initially well-regarded for its transparency and reliability.

In recent years, it has yet to gain traction, as evidenced by its total market cap of just $83 million in 2024.

GUSD was among the first regulated stablecoins in the world. Although it benefits from the direct supervision and regulatory oversight of the New York State Department of Financial Services, the Gemini saga has hit the FTX brand hard.  BMJ Score: 2.0

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FRAX: The Fractional-Algorithmic Stablecoin

Frax (FRAX) is a different type of stablecoin. Unlike other stablecoins, which are either fully backed by collateral or backed by algorithms that try to keep the price stable, it has been designed as a hybrid of the two: a “fractional-algorithmic” stablecoin.

In December 2020, Sam Hamidi-Kazemian, an Iranian-American software programmer, introduced FRAX on the Ethereum mainnet. It derives its name from its hybrid fractional reserve system. Parts of its supplies are backed by collateral, while mathematical cryptographic algorithms back parts.

Hamidi-Kazemian created FRAX to replace fixed-supply digital assets such as BTC with highly scalable, decentralized money. FRAX is pegged 1:1 to USD, meaning it strives to maintain 1 FRAX = $1.

We gave FRAX a score of 2.0 due to several factors. After hitting a peak of $2.90 billion in 2022, the coin’s market cap has steadily fallen to $648 million. While the project has abandoned its algorithmic model in favor of full collateralization, it remains to be seen if this transition will help reverse the fortunes of the stablecoin. BMJ Score: 2.0

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USDD: Tron’s Decentralized Stablecoin

Crypto entrepreneur Justin Sun, founder of Tron blockchain, created USDD, a US dollar-pegged algorithmic stablecoin. It was launched on BNB Chain, Ethereum, and TRON in May 2022.

USDD is “decentralized USD” and is managed through a TRON-based DAO. It maintains its 1:1 peg with USD by positioning itself as an over-collateralized stablecoin. It is backed not by a real-world asset but by a diversified basket of crypto assets such as TRX, BTC, and USDC.

USDD claims to be a decentralized, tamper-proof, and freeze-free stablecoin system. It eliminates the role of a centralized authority. In October 2022, the Commonwealth of Dominica accepted USDD as legal tender.

We gave USDD a score of 2.0 because its market cap is still very low, at around $730 million. Additionally, while the coin is available on six exchanges, most do not accept US customers due to regulatory restrictions. BMJ Score: 2.0

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What Is a Stablecoin?

Stablecoins explained: A stablecoin is a digital currency that retains its value because it’s backed by the value of an underlying asset, which can be anything from fiat currency to oil and gold or sometimes even cryptocurrency.

For example, Tether (USDT) and USD Coin (USDC) are stablecoins backed by US dollars held in reserve. Frax (FRAX), on the other hand, is the first stablecoin supported by asset collateralization and mathematical cryptographic algorithms.

Types of Stablecoins

As the government supports fiat currency, so do stablecoins, which are supported by some other asset or authority. Here are the types of stablecoins and how they’re funded.

Fiat-Backed Stablecoins

Fiat-backed stablecoins are associated with a particular currency: US dollars, Euros, etc. Fiat-backed stablecoins offer better stability, especially compared to crypto-backed stablecoins. While cryptocurrencies come with wild price fluctuations, fiat-backed stablecoins come with minimal price fluctuations, as there’s a trusted currency behind them.

Circle offers USDCoin, a fiat-backed stablecoin. This coin can be exchanged 1:1 with the US dollar. It is generally safe, as every USDC is backed by one US dollar.

Crypto-Backed Stablecoins

As the name suggests, these are stablecoins “backed” by other crypto assets. Because cryptocurrency prices can be volatile, crypto-backed stablecoins are overcollateralized (meaning they keep extra crypto in reserves in case of a market crash).

For example, to borrow $5 of a crypto-backed stablecoin, you may need to “put in” (or lock up) $10 of another crypto asset as collateral. If the underlying crypto asset loses its value, you still have a built-in cushion of $5. In general, this volatility makes crypto-backed stablecoins less reliable than fiat-backed stablecoins.

The most popular crypto-backed stablecoin is Wrapped Bitcoin, which is backed by bitcoin and issued on the Ethereum blockchain.

Commodity-Backed Stablecoin

These stablecoins maintain value through precious metals or commodities such as real estate or oil. While they are generally centralized, this centralization protects users from crypto volatility.

Commodity-backed stablecoins allow you to invest in assets that may otherwise be out of reach. For example, obtaining and storing a gold bar can be complex and expensive, so holding a “gold stablecoin” is an easier way to store value without buying the underlying commodity.

Gold is the most popular commodity to be collateralized. Paxos Gold, Tether Gold, and Digix are three of the most liquid gold-backed stablecoins.

Algorithmic Stablecoin

Algorithmic-backed stablecoins rely on specialized algorithms and smart contracts to manage the supply of circulating tokens. For example, suppose the price of an algorithmic stablecoin is set at $1, but the stablecoin price rises higher. In that case, the computer algorithm will automatically release more tokens into the supply to reduce the price.

Alternatively, an algorithmic stablecoin will reduce the number of tokens in circulation when the market price drops below the price of the fiat currency it tracks. Terra was a popular algorithmic stablecoin that lost its peg to the US Dollar in May 2022 when the crypto market crashed. The dramatic collapse of Terra exposed the inherent fragility of algorithmic stablecoins due to their dependence on market conditions, which can often become highly volatile.

The most popular algorithmic-backed stablecoin is Dai, which MakerDAO issues. Dai runs on the Ethereum blockchain and is pegged to the US dollar. Other popular algorithmic-backed stablecoins include FRAX, USDD, USDX, and SUSD.

Why Do We Need Stablecoins?

Here are some primary use cases:

• Safe Haven Asset: Unlike cryptocurrencies that fluctuate dramatically, those using stablecoins to store value have minimal risk of loss.
• Payments: Businesses can benefit from accepting stablecoins as payment, allowing them to reduce transaction fees that come with typical payment processors.
• Instant Settlements: When settlements are paid out, they often can’t be immediately delivered because they’re subject to regular banking hours. Stablecoins operate on blockchain, meaning they run 24/7: parties can receive settlement immediately.
• Lending: Stablecoin lending is a high-yield opportunity for crypto investors, as it can offer double-digit interest.
• Escrow: Stablecoins automate the process through smart contracts that evaluate escrow conditions without using institutional intermediation.
• Alternative Banking: 14.1 million American adults are unbanked. You only need internet access to have a stablecoin “account,” which opens financial access to everyone.

How Do You Make Money with Stablecoins?

Most people make their money with regular cryptocurrency through trading, mining, staking, lending, or yield farming. Because stablecoins are tied to an asset, making money with stablecoin works differently.  Here are the ways to make money with stablecoins:

• Staking: Staking involves helping maintain the flow of the blockchain network on a particular asset. In return, you earn compensation from income from the network. Essentially, you’re locking in your stablecoins to receive rewards. Examples of stablecoins that offer staking rewards include Binance, Tether, and PAX Gold. (See our guide to Best Crypto Staking Yields.)
• Lending: You can lend your coins to borrowers to earn money, with stablecoin interest rates ranging from 5 to 12 percent or more. You can lend your stablecoin on many major crypto lending platforms, such as Nexo and Youhodler. (See our guide to Top Crypto Lending Platforms.)
• Yield Farming: Yield farming allows investors to earn money by lending stablecoins through smart contracts, similar to earning interest on a traditional savings account. (See our guide to the Best Yield Farming Rates.)

As you can see from the list above, decentralized finance (DeFi) offers many opportunities to generate passive income from your stablecoin holdings. To learn more about your earning potential, see our guide to DeFi interest rates.

How Price-Stable Are Stablecoins?

When looking at the prices of stablecoins on digital asset platforms, you will notice that stablecoins often do not remain “stable” at $1.00. For example, as of this writing, the Gemini Dollar (GUSD), Tether (USDT), and USDD were trading at $0.998,  $0.999, and $0.997, respectively. This movement away from the $1 peg is not unusual, and each stablecoin has mechanisms that quickly bring the price back to the desired peg.

The reason is that the issuers of dollar-collateralized stablecoins need to manage the supply of their coins through issuing and burning/redeeming to ensure their coins' value stays roughly on par with the US dollar.

However, several stablecoins have also lost their peg entirely. Among fiat-backed stablecoins, Steem Dollars (SBD) is a notable example. Part of the Steemit network, SBD was designed to maintain its value at one dollar.

The startup behind the Steemit network eventually stopped managing the coin’s money supply and let the digital currency float freely. This caused the coin’s value to surge to $15 during the 2017 rally before crashing down as low as $0.51.

But the most catastrophic example of a stablecoin losing its peg has to be the story of Terra. An algorithmic stablecoin launched in 2018, Terra was a very popular project helmed by a capable team of experts and backed by prominent investors like HashKey Digital Asset Group and Huobi Capital.

Terra (UST) was tied to its governance token, LUNA. The system relied on investor demand, pricing data, and market volatility to maintain a 1:1 peg to the US dollar. The values of UST and LUNA were interlinked in this system.

Terra was also linked to a lending platform called Anchor, which promised 20% yields to anyone who staked UST on their platform. This created an influx of users to the Terra blockchain, and the price of LUNA reached an all-time peak of $120 as the demand for UST increased.

During the crypto market crash in May 2022, short selling by wealthy investment firms triggered panic selling by other investors as UST lost its peg to the dollar. This bank run created a “death spiral,” collapsing the value of both UST and LUNA in a matter of days.

The event wiped out nearly $60 billion from Terra investors, dealt a severe blow to the entire crypto market, and raised serious questions about the stability of stablecoins. Many experts cited this as a lesson about the glaring weaknesses in the concept of “algorithmic stablecoins.”

It must be noted that fiat and gold-backed stablecoins are far more resistant to such volatility. However, even these stablecoins are not 100 percent price-stable. Moreover, due to their centralized nature and occasional lack of transparency, even fully-collateralized stablecoins carry some risk.

Investor Takeaway

For a currency to work, it has to store value reliably. Savers need to feel confident that the amount of money they put in the bank on Monday will reasonably reflect their wealth on Friday. Both inflation and deflation need to stay under control.

That is why several digital currency projects have taken a new approach. Instead of replacing traditional money, they’ll work alongside it. “Stable cryptocurrencies” peg themselves to a fiat currency, typically the dollar, and automatically adjust the number of tokens in circulation to keep the price stable.

This stable characteristic makes these tokens useful for several reasons, including safe exchange holdings, as capital for lending, and as part of a yield-generating portfolio.

 

Always do your research and never invest more than you are willing to lose. And consider subscribing to Bitcoin Market Journal to help you become a smart crypto investor.