Is it worth investing in stablecoins amid market volatility in Germany

Stablecoins have become one of the most important instruments in today’s digital and crypto economy. In 2025, when bitcoin and ethereum often fluctuate by more than 10% within a single day, more German investors are asking whether stablecoins can serve as a safe alternative to traditional assets. Their core feature is being pegged to fiat currencies such as the US dollar or the euro, which is designed to guarantee stability. In practice, this means investors do not face sudden crashes but can still benefit from the flexibility of blockchain. The rising popularity of stablecoins in Germany and across the European Union is also linked to eurozone inflation and the limited profitability of bank deposits. For many retail users and businesses, stablecoins have already become a digital form of cash — combining predictability with modern financial technology. Still, important questions remain about security, regulation, and the long-term future of this asset class. As G.business notes, in 2025 investors in Germany need to evaluate stablecoins more carefully than ever before.

What are stablecoins and how do they work

Stablecoins are a special category of cryptocurrency designed to maintain a stable value, usually pegged to the US dollar, the euro, or even gold. Unlike bitcoin, whose price is determined entirely by market forces and can change by 50% in a short time, stablecoins aim to minimize such volatility. To achieve this, different mechanisms are used: fiat reserves in banks, crypto collateral, or algorithmic supply adjustments. For German investors, this provides a way to keep money inside the blockchain ecosystem without risking extreme price drops. Stablecoins play multiple roles: they serve as a payment method, a reserve of value, and an entry point to decentralized finance (DeFi). It is crucial, however, to understand that each model carries different risks depending on the issuer. Before buying, investors should analyze how the token is backed and whether the reserves are audited.

Main types of stablecoins:

• Fiat-backed (USDT, USDC, EURC) – backed by bank-held reserves in USD, EUR or other fiat.
• Crypto-backed (DAI) – collateralized by cryptocurrencies, usually ETH.
• Algorithmic (UST, AMPL) – stabilized through algorithms, but historically the most risky.

Advantages of stablecoins for German investors

For investors in Germany, stablecoins are increasingly seen as a digital alternative to cash. They protect capital during downturns, allow faster transfers between exchanges, and provide access to global crypto markets. In a high-inflation environment, they are often considered a hedge, especially when savings accounts and bank deposits deliver negative real returns. Businesses in Germany are also starting to use stablecoins for international trade because transactions are faster and cheaper compared to banks. Another major benefit is their role in DeFi protocols, where stablecoins can generate passive income. Stablecoins are also available 24/7, without restrictions such as banking hours or international transfer limits. This flexibility makes them attractive to both retail investors and companies engaged in cross-border operations. They also provide a practical way for Germans to diversify their financial strategies without leaving the crypto ecosystem.

Key advantages:

• Protection from bitcoin and ethereum volatility.
• Lower international transfer costs.
• Participation in DeFi and staking opportunities.
• Alternative to low-yield German bank deposits.
• High acceptance across global crypto exchanges.

Risks of investing in stablecoins

Despite their apparent stability, stablecoins come with significant risks. The most important is trust in the issuer and the transparency of reserves. Tether (USDT), the largest stablecoin, has faced repeated criticism for not being fully backed by US dollars, instead relying partly on commercial paper and bonds. The 2022 collapse of TerraUSD (UST) showed how quickly a stablecoin can fail, wiping out billions of euros in investor savings. Crypto-backed coins like DAI are more decentralized but depend on ETH, which remains highly volatile. In Germany and the EU, regulation is tightening, and certain models may soon be banned. There are also technological risks, such as smart contract bugs, exchange hacks, and wallet access loss. Importantly, stablecoins in Germany are not covered by deposit insurance schemes such as Einlagensicherung, meaning they cannot be considered as safe as traditional bank deposits.

Main risks:

• Lack of full transparency in reserves.
• Regulatory restrictions from BaFin and EU law.
• Technology risks: hacks and contract failures.
• Risk of losing the peg (depeg).
• No deposit guarantee like in German banks.

Regulation in Germany and the EU

Since 2024, the EU’s MiCA regulation (Markets in Crypto-Assets) has created a clear legal framework for stablecoins. In Germany, the financial regulator BaFin enforces strict requirements: issuers must hold reserves in EU banks, undergo regular audits, and maintain licenses. Algorithmic stablecoins are effectively excluded from the German and European market. Exchanges operating in Germany must also comply with BaFin rules when offering stablecoins. These regulations increase investor protection but reduce flexibility for issuers. For German investors, this means more transparency and lower risks of fraud, but also fewer exotic products. Germany, as the largest economy in the EU, is setting the tone for the entire European crypto market. In practice, stablecoins are now more secure for German users than they were just a few years ago.

Earning with stablecoins in DeFi

One of the main attractions of stablecoins for German investors is their use in decentralized finance (DeFi). Platforms like Aave, Compound, Curve allow users to lend stablecoins and earn interest, typically between 3% and 10% annually. Centralized exchanges such as Binance also offer fixed savings products with returns of 2–5%. Higher yields often involve higher risks, such as smart contract vulnerabilities or liquidity issues. In Germany, conservative investors usually prefer regulated platforms with established reputations. More aggressive investors participate in liquidity pools, where they can earn additional rewards from transaction fees. While returns are higher than most German savings accounts, investors must understand that risks are not covered by traditional financial guarantees. DeFi with stablecoins remains one of the fastest-growing financial niches in Europe.

Practical scenarios for German investors

Stablecoins can serve different purposes depending on the investor’s profile. Beginners, traders, and conservative investors all use them differently.

For beginners: choose USDC or EURC, buy only on licensed exchanges like Coinbase Germany or Bitpanda, and store on hardware wallets. Use them as digital euros, not for speculation.

For experienced traders: use USDT or DAI to quickly move in and out of crypto positions, participate in DeFi with higher yields, and monitor regulatory changes in Germany closely.

For conservative investors and pensioners: stick to regulated stablecoins, avoid complex DeFi protocols, and use centralized exchange savings products with 2–4% annual returns. Stablecoins can then act as a digital equivalent of a German savings account (Sparbuch).

In 2025, stablecoins have become one of the most essential building blocks of the crypto economy in Germany and across the EU. They provide stability, fast payments, and opportunities for earning passive income. At the same time, they are not risk-free: from opaque reserves to strict regulation and technological threats, investors must remain cautious. The TerraUSD collapse proved that even major projects can collapse in days. MiCA regulation and BaFin oversight make stablecoins more transparent and safer, but also more restricted. For German investors, stablecoins should be seen as a complementary tool — not a replacement for traditional assets. The most effective strategy is to use them as digital cash reserves, combining stability with moderate returns while keeping risks under control.

Latest events in politics and global economy at Cryptonews – practical tips on how to act and invest. Read: Transition to Banking 2.0: How Stablecoins Are Changing the Banking System