An investment into an asset you don’t understand is bound to fail eventually. That’s why it’s important to understand the key differences between altcoins vs. stablecoins if you plan on diversifying your crypto holdings.
Altcoins often offer innovative features and high returns (as well as higher risk!) and have a highly fluctuating market cap and price. In contrast, stablecoins are pegged to other assets like the US dollar, preserving purchasing power and minimizing volatility. While stablecoins provide stability for payments and trading, the best altcoins can offer significant growth opportunities. Let’s take a closer look at the differences between the two.
What are Altcoins?
Altcoins are cryptocurrencies other than Bitcoin. The term combines “alternative” and “coin.” These digital assets introduce different functionalities. Ethereum, for example, supports smart contracts that enable developers to create decentralized applications (dApps).
Altcoins experience extreme market volatility, with prices fluctuating based on market demand, technological advancements, investor interest, and other factors.
Learn more about altcoins.
What are Stablecoins?
Stablecoins are altcoins designed to maintain a stable value by linking them to various assets, like gold. One example is USD Coin (USDC), which is a widely used stablecoin backed by US dollar reserves.
Stablecoins have little to no price volatility, making them a great option for payments or value storage. Unlike altcoins, which fluctuate based on market demand, stablecoins maintain the same price.
Many stablecoins use smart contracts to regulate issuance and redemption. This ensures transparency and efficiency in maintaining their value.
Learn more about stablecoins.
Key Differences Between Altcoins and Stablecoins
While stablecoins are technically altcoins, there are so many differences between them that many investors see the two as different types of assets, especially when deciding which one to invest in.
Below, we will examine the main differences between altcoins vs stablecoins to help you understand them better and make more informed decisions.
Wondering what crypto is the best to buy right now? Check out our quick guide on the latest trending cryptocurrencies!
Volatility and Price Stability
Altcoins experience high price volatility, with their market capitalization fluctuating based on crypto market trends and investor sentiment. Their price fluctuations are influenced by outside factors like global news, technological developments, and demand. During bull runs, altcoins often see rapid price increases, attracting early investors seeking high returns. However, in bearish conditions, their value can drop significantly.
Stablecoins maintain a fixed price by being pegged to another asset like fiat money or gold. This minimizes price volatility, making them useful for payments and storing value. USD Coin (USDC), for example, is backed by U.S. dollar reserves, ensuring a 1:1 redemption ratio. While stablecoins avoid significant price fluctuations, their value depends on their reserve, transparency and backing assets.
What They’re Used For
Altcoins power various functions in the crypto ecosystem. Ethereum (ETH), for example, allows developers to build decentralized applications (dApps) on its blockchain. Binance Coin (BNB) is used for transaction fee discounts and governance on the Binance exchange. Privacy-focused altcoins like Monero (XMR) offer untraceable transactions. These specialized functions attract different users and drive demand.
Stablecoins act as a stable asset for transactions and a hedge against volatility. Traders use them to move funds between cryptocurrencies without cashing out into traditional banks. Businesses accept Tether (USDT) for cross-border payments, while DeFi platforms rely on stablecoins for lending and borrowing. Unlike altcoins, which often seek price growth, stablecoins prioritize stability.
Risks and Benefits
Altcoins offer high potential returns, making them attractive to all kinds of investors. Many have grown to large market caps, with Ethereum surpassing $400 billion during bull markets. They also provide a more tangible benefit in the variety of functions they offer, like crypto lending, blockchain games, etc. However, altcoins also come with some risks:
Regulatory Uncertainty. The ever-changing regulatory landscape poses challenges for many altcoin projects, potentially impacting their adoption and value in the cryptocurrency market.
Security Vulnerabilities. Altcoins may have security flaws due to less mature codebases, increasing the risk of hacks and financial losses.
Market Volatility. Altcoins are subject to significant price fluctuations, influenced by market trends and investor sentiment, leading to potential losses.
Stablecoins reduce exposure to volatility but face risks related to transparency and regulatory oversight. They also make it possible to perform faster and more efficient cross-border transactions compared to traditional banking systems.
Centralized stablecoins like USD Coin (USDC) depend on third-party reserves, while algorithmic stablecoins can fail without sufficient collateral. The collapse of Terra Luna’s stablecoin (UST) in 2022 demonstrated the dangers of algorithmic stablecoins, which rely on market incentives rather than any direct backing. Tether (USDT), the most widely used stablecoin, also faces concerns over the transparency of its reserve. However, stablecoins provide liquidity and stability within the cryptocurrency ecosystem, making them essential for both traders and businesses.
What Backs Their Value
Altcoins derive their value from various factors, like their underlying technology, popularity, community strength, and more. Unlike stablecoins, altcoins are not typically pegged to traditional assets, which means their prices can technically go to the moon or default to zero at any given time. Even popular altcoins can experience volatility – for example, Ethereum’s price fluctuates based on its utility decentralized finance (DeFi) applications and overall market sentiment.
Stablecoins are designed to maintain a stable value by pegging their price to an underlying asset, such as fiat or commodities. This pegging mechanism reduces exposure to volatility, making stablecoins useful for payments and storing value. There are several types of stablecoins:
Fiat-Collateralized Stablecoins. These stablecoins are backed by reserves of fiat currency held by a central entity. For example, USD Coin is backed by U.S. dollar reserves, ensuring a 1:1 redemption ratio.
Commodity-Backed Stablecoins. Some stablecoins are pegged to the value of commodities like gold or oil. The issuer holds the commodity in reserve and adjusts the stablecoin supply as needed to maintain the peg.
Crypto-Collateralized Stablecoins. These stablecoins are backed by other cryptocurrencies. To account for the higher volatility of the collateral, these stablecoins are often over-collateralized.
Algorithmic Stablecoins. Instead of being backed by assets, algorithmic stablecoins use smart contracts to control the supply of the stablecoin, aiming to maintain its peg through automated mechanisms.
Rules and Regulations
The regulatory environment for altcoins varies by jurisdiction and is continually evolving. Some countries have embraced cryptocurrencies, providing clear guidelines and fostering innovation. Others have imposed strict regulations or outright bans, citing concerns over fraud, money laundering, and financial stability.
Stablecoins have attracted significant regulatory attention due to their potential impact on the traditional financial system. Regulators are concerned about issues such as reserve transparency, consumer protection, and systemic risk. For example, the European Union’s Markets in Crypto-Assets (MiCA) regulation, which became fully active in December 2024, provides a comprehensive framework for crypto-assets, including stablecoins. Japan softened its stablecoin rules in March 2025, allowing licensed crypto exchanges to support stablecoins like USDC.
How New Coins Are Created
Different altcoins use different supply mechanisms. Some have a fixed supply cap – just like Bitcoin – introducing scarcity that can drive value. Others, such as Ethereum, use an inflationary model, continually introducing new coins into circulation. This approach supports network security and operations but may impact long-term value. Additionally, certain altcoins, like XRP, have a significantly larger total supply, with a maximum of 100 billion coins.
Many altcoins use burning to control their total and circulating supply. The process permanently removes a certain number of tokens from circulation, reducing the total supply. This is akin to a company buying back shares, aiming to increase the value of remaining tokens by creating scarcity. For example, Binance Coin (BNB) implements quarterly burns based on trading volumes, systematically reducing its supply to potentially enhance its value.
The primary purpose of token burning is to adjust the balance of supply and demand. As tokens are removed from circulation, scarcity increases, which can lead to a rise in the token’s value. However, the actual impact on price depends on various factors, including overall market conditions and investor perception.
While token burning reduces supply, it doesn’t guarantee a price increase. Market conditions, project performance, and investor sentiment all still play a role and can sway the asset’s price.
Stablecoins’ supply mechanisms vary based on their collateralization method. For example, for fiat-collateralized stablecoins, new tokens are minted when users deposit the corresponding fiat currency with the issuer, and tokens are burned when users redeem them for the underlying asset.
When it comes to algorithmic stablecoins, they use special algorithms and smart contract technology to automatically expand or contract the supply based on market conditions. If the stablecoin’s price rises above its peg, the algorithm may increase supply to bring the price back down. If the price falls below the peg, the supply may be reduced to restore the peg.
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Use in Decentralised Finance (DeFi)
Altcoins play a key role in the DeFi ecosystem as they offer functionalities beyond traditional financial systems. For instance, Ethereum’s network supports the creation of decentralized applications (dApps) that facilitate lending, borrowing, and trading without intermediaries. This innovation has led to the proliferation of DeFi platforms, allowing users to engage in complex financial activities securely and transparently. Altcoins are often used as utility tokens by various crypto projects, like BNB.
Stablecoins serve as a bridge between volatile cryptocurrencies and stable fiat money within DeFi platforms. Their stability makes them ideal for transactions, lending, and yield farming in DeFi. For example, USD Coin (USDC) is widely used across DeFi protocols, providing a stable medium of exchange and store of value.
How Popular and Trusted They Are
The adoption of altcoins varies significantly. Large-cap altcoins like Ethereum and Binance Coin have achieved substantial market recognition, being widely accepted across exchanges and merchants. Some altcoins, like ETH and SOL, even get their own spot ETFs. Altcoins’ growing use cases, including decentralized applications and smart contracts, have boosted their acceptance among both retail and institutional investors.
Stablecoins have seen even greater adoption, especially in regions with unstable local currencies. Their ability to maintain a stable value makes them attractive for everyday transactions and as a hedge against inflation. Popular stablecoins like USDT and USDC serve as a great gateway to the crypto world for new investors seeking the comfort of the fiat currencies they’re familiar with.
Who Controls Them: Centralised vs. Decentralised
The degree of decentralization among altcoins varies. Cryptocurrencies like Bitcoin and Ethereum operate on decentralized networks, with no single entity controlling the protocol. This decentralization enhances security and aligns with the core principles of blockchain technology. However, some altcoins are more centralized, with development and governance controlled by specific organizations, potentially affecting their resilience and trustworthiness.
Stablecoins often exhibit higher levels of centralization, particularly those backed by fiat. For example, USDT is issued by centralized entities that manage the underlying reserves and control issuance. This centralization can lead to concerns about transparency and regulatory compliance. Conversely, algorithmic stablecoins aim to maintain decentralization by utilizing smart contracts to manage supply and peg stability, though they may face challenges in sustaining their pegs during market volatility.
Altcoins vs. Stablecoins: Comparison Table
Altcoins vs. stablecoins: the key differences.
Does The Crypto Industry Need Altcoins and Stablecoins, or Is Bitcoin Enough?
Short answer: it does. Long answer: while Bitcoin remains the number one cryptocurrency, it cannot exist in a vacuum. Altcoins and stablecoins have introduced features that Bitcoin alone does not offer. They help to attract investors that may have otherwise overlooked crypto. Additionally, they provide alternatives for people looking to diversify.
Altcoins, for example, aim to improve transaction speeds, scalability, and privacy features, catering to varied user needs. They also serve as the basis for blockchain-based applications and projects.
Stablecoins, on the other hand, address the inherent volatility of cryptocurrencies like Bitcoin. By pegging their value to stable assets such as fiat currencies, stablecoins like USDC offer price stability, making them suitable for everyday transactions and as a store of value.
Which One Should You Choose? Altcoins vs. Stablecoins
Altcoins and stablecoins have quite a few key differences between them, and both also provide unique benefits as potential investments.
Remember to always DYOR before making any financial decisions.
For Investment
Altcoins offer higher returns but come with more risk. If you’re looking for an altcoin investment, expect big price swings. Some projects bring massive gains, while others fail spectacularly. Research is key. Meanwhile, popular stablecoins don’t gain value – they just hold their peg. They work well for storing value but won’t grow your portfolio.
Read more: Best cryptocurrencies for long-term investment.
For Everyday Transactions
Stablecoins win here. Their stability makes them a reliable option for making payments. Merchants prefer them since they don’t fluctuate like altcoin prices. Many cryptocurrency exchanges support trading pairs with stablecoins, making it easier to buy and sell other assets. Altcoins can also be used, but their volatility makes them less practical for daily spending.
For Protection Against Price Swings
If you’re worried about market crashes, stablecoins are your best bet. They help protect funds during downturns in the crypto market as they remain a strong tool for risk management. Altcoins, however, expose you to price swings, making them a risk when it comes to hedging.
How To Buy and Store Altcoins and Stablecoins
Here’s how you can buy altcoins and stablecoins.
Choose a Cryptocurrency Exchange. Look for platforms that support both altcoins and popular stablecoins. Check fees, security, and available trading pairs.
Deposit Funds. Most exchanges allow deposits in fiat like the US dollar or other cryptocurrencies.
Select Your Asset. Decide between altcoins and stablecoins based on your goals. When choosing a specific asset, consider factors like fees, market cap and liquidity.
Make the Purchase. Execute the trade and store your assets securely.
A secure crypto wallet is an essential part of any crypto journey. There are three main wallet types:
Hot Wallets (Online). Best for making frequent trades. These wallets are convenient but can be vulnerable to hacks as they are connected to the Internet.
Cold Wallets (Offline). Ideal for long-term security. Hardware wallets protect against online threats.
Exchange Wallets. Some platforms provide built-in wallets, but holding assets on exchanges is risky.
Read more: Top crypto wallets.
In the crypto industry, security is a priority. Use strong passwords, enable two-factor authentication, and keep backups.
When you buy stablecoin or altcoin tokens, remember to pay attention to their blockchain. Different coins run on different blockchain networks, so always check compatibility. Sending assets to the wrong network can result in losing your assets. For example, USDT is often traded on the TRON network because it offers lower fees.
Final Thoughts
Both altcoins and stablecoins serve important roles in the cryptocurrency industry. Altcoins offer high growth potential but come with volatility, making them ideal for risk-tolerant investors. Meanwhile, popular stablecoins provide price stability, making them useful for those looking to use crypto for payments and protect their funds during market downturns.
Your choice depends on your goals. If you want exposure to the crypto market for potential gains, altcoins are the way to go. If you prioritize stability and liquidity, stablecoins are the safer bet. Whichever you choose, always research thoroughly and use secure storage solutions to protect your assets.
FAQ: Altcoins vs. Stablecoins
Can stablecoins increase in value like altcoins?
No, stablecoins will always have one value. If you want to invest in a cryptocurrency that might provide returns in the future, consider altcoins or Bitcoin. Alternatively, if you are risk-averse, you can also go for traditional investment options like ETFs – consider checking out a spot Bitcoin ETF?
Are stablecoins safer than altcoins?
In terms of having future-proof value, yes. However, stablecoins can also be hacked, and, in rare cases, lose their value.
Which is better for beginners—altcoins or stablecoins?
When comparing altcoins vs stablecoins, beginners will find stablecoins easier to manage. Holding stablecoins protects against volatility, making them a safe way to enter the crypto space without worrying about price swings. Altcoins, while offering high returns, require more research and risk tolerance. Their market cap fluctuates based on demand and speculation. If you’re just starting out, stablecoins can provide a reliable way to store your funds, while altcoins offer growth opportunities once you understand the risks.
Do I need a different wallet for altcoins and stablecoins?
It depends on the blockchains they run on. Many multi-chain wallets support both stablecoins and altcoins, but some tokens operate on exclusive networks. For example, you can hold altcoins like Solana (SOL) in a Solana-based wallet, while ERC-20 stablecoins require an Ethereum-compatible wallet. Always check compatibility before making transactions.
Can I earn passive income with altcoins and stablecoins?
Yes. Holding stablecoins can generate passive income through lending platforms, where users earn interest similar to financial institutions. Some stablecoins offer staking options, though rewards are lower due to their stability. Meanwhile, if you hold altcoins, you can stake them, provide liquidity in DeFi, or engage in yield farming. While altcoins often offer higher returns, they come with greater risk, as their market cap and value can fluctuate rapidly.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
