Stablecoins: How the $1 Peg Holds, and When It Slipped
A stablecoin is a crypto token designed to hold a fixed value, usually $1, by keeping reserves of cash and short-term government debt that the issuer promises to swap for the token. The two largest dollar stablecoins are Tether's USDT and Circle's USDC.
Stablecoins are the part of crypto that is meant to be boring. Traders often hold them between crypto trades, so whether one is really worth $1 matters to anyone who keeps a balance in one. This page shows how the peg is held, what the new US law requires, and eight-plus years of how closely the two largest held it.
How it works
The issuer sells tokens for dollars and promises to buy them back at $1. Each dollar that comes in is put into reserves, mostly cash and short-term government debt. The token then moves between wallets on one or more blockchains, and anyone who can redeem with the issuer can turn it back into a dollar.
Traders do the day-to-day work of holding the price. If a stablecoin trades at $0.99 on an exchange, someone who can redeem buys it there and hands it to the issuer for $1. If it trades at $1.01, that person gives the issuer $1 for a new token and sells it. Both trades push the price back toward $1.
What the peg depends on
So the peg is only as strong as two things: the reserves being really there, and redemption really working. When either is in doubt, the price can slip, because the buyers who would close the gap stop trusting that they will be paid.
Not every stablecoin works this way. Some try to hold $1 with crypto collateral or with a trading formula instead of cash reserves. This page covers the reserve-backed kind, which is what the two largest, USDT and USDC, say they are.
What the US law now requires
The GENIUS Act became Public Law 119-27 on 18 Jul 2025, and this page reads the text as published on govinfo.gov on 25 Sep 2026. It sets rules for “payment stablecoins” issued in or into the US.
Reserves must back the tokens on “an at least 1 to 1 basis”, in a short list of assets: coins and currency, bank deposits, Treasury bills, notes or bonds with 93 days or less to maturity, overnight repurchase agreements backed by such bills, and a few similar holdings. Long-dated bonds and stocks are not on the list.
Each month the issuer must publish its reserves, have that report examined by a registered public accounting firm, and have its chief executive and chief financial officer certify it.
Issuers may not pay interest. The act bars any issuer from paying holders “any form of interest or yield” solely for holding the coin. That is why the reserves earn interest for the issuer, not for the person holding the token, unlike a money market fund.
Timing matters here. The law takes effect on the earlier of 18 months after it was signed, which is 18 Jan 2027, or 120 days after regulators issue final rules. Smaller issuers, up to $10 billion outstanding, may choose a state regime instead if it is substantially similar.
A worked example
Take a trader holding 10,000 USDT between trades on 14 Nov 2018. USDT closed that day at $0.966644, the lowest close in the file. Marked at the market, the balance was worth 10,000 times $0.966644, or $9,666.44, a paper loss of $333.56 on money meant to be standing still.
The same balance in USDC on 11 Mar 2023 would have been marked at $0.9715, USDC’s lowest close since 2020: 10,000 times $0.9715 is $9,715.00, a paper loss of $285.00. Both recovered, but a trader forced to sell that day would have taken the loss for real.
Now the reserve cushion, from Tether’s own figures. Its transparency page, read on 25 Sep 2026, shows its last reserves report, dated 30 Jun 2026: total assets of $187,751,825,408 and liabilities of $183,642,296,213. Assets minus liabilities is $4,109,529,195, the net equity the page also shows.
That equity is 2.24% of the liabilities, from 4,109,529,195 divided by 183,642,296,213. So the reserve assets could lose about 2.2% of their value before, on these reported numbers, there would be less than $1 behind each token. Reserves held in short Treasury bills rarely move that much; riskier assets can.
The original data
The price data: daily closes of USDT from 9 Nov 2017 and of USDC from 8 Oct 2018, both to 24 Sep 2026, 3,242 and 2,909 days, downloaded from Yahoo Finance on 25 Sep 2026. The yearly counts are published as a CSV of days off the peg.
The test: a close more than one cent from $1, below $0.99 or above $1.01. USDT failed it on 59 of 365 days in 2018, 53 in 2019, 8 in 2020 and 1 in 2021, and on none from 2022 through 24 Sep 2026.
USDC failed it on 90 days in 2019, 29 in 2020 and 1 in 2021, then once more, on 11 Mar 2023, and not since. Before that it had failed on 57 of its first 85 days in the file, in late 2018. Its lowest close of all was $0.970124, on 18 Mar 2020.
The issuer figures, read from each company’s own public pages on 25 Sep 2026. Tether’s reserves report of 30 Jun 2026 shows $187.75 billion of assets, $183.64 billion of liabilities and $4.11 billion of net equity. Its current-balance table counts the tokens it has created on each chain and takes out those not yet issued or frozen, leaving what it calls net circulation: $183.73 billion across the 14 chains it lists, on its update of 25 Sep 2026. These issuer figures are published as a CSV of issuer figures.
Most of that USDT sits on two chains: 92.68 billion on Tron and 86.37 billion on Ethereum, on the same count. Circle’s supply feed listed 75.36 billion USDC across 39 chains, 66.53% of it on Ethereum. These are the issuers’ own numbers.
Video coverage splits between scandal and yield. In the 24,971-video corpus this site studies, only 3 titles use the word stablecoin, at a median of 736 views. Four name Tether, USDT or USDC, and the most watched of those, at 4,588,948 views, is an investigation into Tether. Each video is counted once.
When it fails
The first failure is the reserves. If the assets behind the tokens are worth less than claimed, or cannot be sold fast enough, holders who redeem late may get less than $1. The monthly reserve reports the new law requires are how a holder can check it.
The second is redemption that stops. A peg held by traders who redeem with the issuer breaks when they cannot, whether because a bank holding the cash is shut or the issuer pauses withdrawals. The 11 Mar 2023 close, on a Saturday, shows how fast a trusted coin can fall when that answer is in doubt.
A third is who can redeem. Most small holders cannot go to the issuer directly and depend on an exchange price. In a panic, that price is the one they get.
A fourth is the issuer’s control. The GENIUS Act requires a permitted issuer to have the technical ability to block and freeze transactions that break the law. That power can be used against theft, and it is a risk to anyone whose address is caught up by mistake.
And a fifth is the tax. The IRS virtual currency FAQ, read on 25 Sep 2026, says exchanging one virtual currency for another means recognizing a capital gain or loss, even though no dollars were withdrawn; the crypto tax page covers the details.
Related
The crypto page covers the market these coins are the plumbing for. The Treasury bills page explains the short-term debt that fills most stablecoin reserves and what it pays when held directly. And the money market funds page describes the closest traditional product, one that does pass its interest on to the holder.
Hold a stablecoin as a parking spot, not a savings account. Keep the amount to what the next trades need, split it across more than one issuer if the balance is large, and check the issuer’s latest reserve report before moving a big sum in.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.