The Federal Reserve sorts stablecoins into three types: coins backed by off-chain assets such as bank deposits, coins collateralized by crypto assets on-chain and algorithmic coins with few or no external assets behind them. Two more designs sit alongside that split: synthetic dollars and yield-bearing wrappers. Each of the five has a different thing that can strain it. The market price is where the strain shows up.
The Federal Reserve’s note says that understanding a coin’s stabilization mechanism bears on its risk of a run. This article applies that idea to prices: what holds each design at a dollar and what strains it.
Five designs, five pressure points
| Design | Examples | Pressure point | What it does to the price |
|---|---|---|---|
| Fiat-backed | USDC, USDT | Reserve and banking access | A gap to par when redemption is in doubt |
| Crypto-backed | DAI, LUSD | Collateral value and liquidations | Follows the collateral market |
| Synthetic | USDe | Funding rates and hedge venues | Follows the cost of the hedge |
| Yield-bearing | sUSDS, sUSDe | Accrual | Climbs above one dollar by design |
| Algorithmic | UST | Reflexive mint and burn | Can fall without a floor |
No source used here ranks the types by safety.
Fiat-backed: the pressure is at the bank
A fiat-backed stablecoin is a claim on an issuer’s reserve. The Federal Reserve describes these coins as backed by bank deposits or other cash-like assets in the traditional financial system and lists Tether and USD Coin as examples. A holder depends on the reserve, the place it is held and the right to redeem against it.
Each issuer publishes its own reserve disclosures and redemption terms, which are the documents that describe this dependency for a given coin.
The pressure point is access: can the reserve be reached, so that a holder can turn the token into dollars at par? March 2023 is the dated example. On 10 March 2023 Silicon Valley Bank entered resolution. According to a Federal Reserve note, about 8% of USDC’s reserves sat there. That night the issuer said it could not withdraw them. USDC lost its peg on secondary markets.
On 12 March the Treasury, the Federal Reserve and the FDIC said depositors would have access to all of their money from Monday 13 March. The issuer said the same day that the funds would be available when US banks opened. Until then the price came from market trading and carried the uncertainty about the reserve. It recovered as redemptions resumed.
The lesson is structural. Any reserve held as bank deposits depends on those banks being reachable. While that is in doubt, the token’s market price carries the question.
Crypto-backed: the pressure is in the collateral
A crypto-backed coin is issued against collateral that sits on-chain. The Federal Reserve describes Maker’s system as smart-contract lending facilities that issue Dai in return for crypto collateral. When Dai trades below a dollar, borrowers can buy it at a discount to repay their loans and retrieve their collateral, which burns Dai.
The pressure point is the value of the collateral. When a vault no longer covers its debt, a liquidation transfers the collateral and the debt to the protocol and an auction sells the collateral for DAI. Sky’s documentation describes Dutch auctions that settle instantly.
Liquity’s LUSD shows the same idea with hard edges. Its V1 documentation describes borrowing LUSD against Ether with a minimum collateral ratio of 110%. Redeeming LUSD for Ether at face value sets a floor under the price and the 110% ratio sets a ceiling over it, both through arbitrage.
A crypto-backed coin’s price therefore tracks two markets at once: its own pools and the market for what stands behind it. The DAI price feed and the LUSD price feed show the two designs.
Synthetic: the pressure is in funding
A synthetic dollar holds its value with positions instead of deposits. Ethena says USDe is not a fiat stablecoin but a synthetic dollar: volatile assets are paired with short futures positions of roughly the same size, so a move in the asset is generally offset by a move in the hedge. Ethena’s documentation describes the backing mix as changing over time, so this article covers the design, not the mix.
The pressure point is funding. A short perpetual position earns or pays funding depending on the market. Ethena’s documentation names funding risk as the possibility of persistently negative funding rates, under which the protocol could be required to pay funding rather than earn it. It says a reserve fund steps in when combined revenue is negative.
The hedge venues matter too. The shorts are opened on derivatives exchanges. Ethena says its backing assets stay on-chain with off-exchange custodians while exchanges are delegated the right to margin the positions, without custody being transferred. Its risk pages list exchange failure risk and custodial risk next to funding risk.
Direct minting and redeeming with Ethena is limited to authorized, whitelisted users. Everyone else reaches the peg through a market: the documentation describes buying USDe below a dollar on Curve to redeem it, or minting and selling above a dollar. The USDe price feed is where a holder meets that market.
Yield-bearing: the price rises on purpose
A yield-bearing stablecoin is a wrapper around another coin. The Federal Reserve’s three-way split has no separate entry for it. Sky describes sUSDS as a tokenized implementation of the Sky Savings Rate for USDS under the ERC-4626 standard. Ethena’s documentation says the USDe value of sUSDe increases over time as rewards accrue to the staking contract.
The wrapper’s anchor is its redemption value in the underlying coin, which rises. Its price against another dollar therefore climbs by design: the dollar crosses board marks sUSDe against USDT as different by design. The pressure point is the accrual itself. The risk page for the Sky.money interface says the savings rate is variable and set through governance. It can change at any time or drop to zero, while USDS de-peg risk still applies.
Yield-bearing stablecoins covers how accrual works.
Algorithmic: the price is the mechanism
The Federal Reserve calls these uncollateralized stablecoins. They aim to keep the exchange rate stable through rules, usually smart contracts, that match supply to demand dynamically, with few or no external assets behind them. The same note says a rebase mechanism is not able to keep the peg if market participants believe that the value of the stablecoin will fall.
TerraUSD (UST) is the dated case. According to the SEC’s amended complaint against Terraform Labs, a holder could swap $1 worth of LUNA for 1 UST at LUNA’s market price, or 1 UST for $1 worth of LUNA. If UST traded at $0.95, a trader could buy it and exchange it for $1 of LUNA, which burned UST and minted LUNA and was meant to raise its price. The coin was stabilised by the value of a companion token, not by dollars.
In May 2022 UST de-pegged again. The complaint says that this time the price did not recover. It notes sales of large amounts of UST beginning on or about 7 May 2022 and states that by the end of May UST, LUNA, wLUNA and MIR were essentially worthless, wiping out more than $40 billion in combined market value. The Federal Reserve note says the collapse reverberated through the digital asset ecosystem.
Where there is no reserve to point to, the price is both the stabilising mechanism and the confidence in it. That is the pressure point.
How the law sorts them
Lawmakers sort mainly by what an issuer promises. The GENIUS Act (Public Law 119-27, approved 18 July 2025) defines a payment stablecoin by an issuer’s obligation to redeem for a fixed amount of monetary value and its representation that it will keep a stable value. It requires permitted issuers to hold identifiable reserves of at least 1 to 1 and to publish the monthly composition of those reserves. It takes effect on the earlier of 18 January 2027 or 120 days after final regulations are issued.
In the European Union, Regulation (EU) 2023/1114 (MiCA) separates e-money tokens, which reference the value of one official currency, from asset-referenced tokens, which reference another value or right or a combination. Its rules for both apply from 30 June 2024. Recital 41 addresses the algorithmic design directly:
The same applies to so-called algorithmic ‘stablecoins’ that aim to maintain a stable value in relation to an official currency, or in relation to one or several assets, via protocols, that provide for the increase or decrease in the supply of such crypto-assets in response to changes in demand.
Neither text defines crypto-backed or synthetic coins as categories. Whether a token falls under a definition depends on its issuer and its promises. This article does not classify any token.
Reading the five on a price board
The stablecoin prices board lists each coin’s market price. The dollar crosses board prices stablecoins in each other, a view in which a drifting dollar stands out. Stablecoin depeg early warning covers what pool balances show during stress, before and alongside the price. DEX-native price feeds explained covers how an on-chain price is measured.
For a monitor, the practical step is to attach the design to the asset. The same gap to a dollar means one thing on a fiat-backed coin, another on a wrapper that is meant to rise and a third on a coin with no reserve.
Sources
Protocol documentation pages carry no date; they were read on 23 October 2026.
- Public Law 119-27, Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act)
- Regulation (EU) 2023/1114 on markets in crypto-assets, Official Journal of the European Union, 9 June 2023
- Federal Reserve Board, In the Shadow of Bank Runs: Lessons from the Silicon Valley Bank Failure and Its Impact on Stablecoins, FEDS Notes, 17 December 2025
- Federal Reserve Board, The stable in stablecoins, FEDS Notes, 16 December 2022
- Federal Reserve Board, Joint Statement by Treasury, Federal Reserve and FDIC, 12 March 2023
- Circle, $3.3 Billion of USDC Reserve Risk Removed, Dollar De-peg Closes
- Sky Protocol Docs, Collateral Liquidation
- Sky Protocol Docs, USDS
- Sky Protocol Docs, sUSDS (Savings USDS)
- Sky, User Risks
- Liquity Docs V1, General
- Liquity Docs V1, Redemptions and LUSD Price Stability
- Liquity Docs V1, Stability Pool and Liquidations
- Ethena Docs, Ethena Overview
- Ethena Docs, How USDe Works
- Ethena Docs, Funding Risk
- Ethena Docs, Peg Arbitrage Mechanism
- SEC v. Terraform Labs PTE Ltd. and Do Hyeong Kwon, Amended Complaint, S.D.N.Y. 1:23-cv-01346
