What Is USDC and How Does It Work?

USDC (USD Coin) is a stablecoin – a type of cryptocurrency designed to maintain a stable value pegged 1:1 to the US Dollar.

Key characteristics:

• 1 USDC aims to equal $1 USD
• Backed by fully reserved assets
• Launched in 2018 by Circle and Coinbase
• Transparent, regularly audited reserves
• ERC-20 token on the Ethereum blockchain

Unlike Bitcoin or Ethereum, USDC doesn't experience significant price volatility.

1. Stability during market volatility

When cryptocurrency markets are turbulent:

• Lock in profits without converting to cash
• Maintain purchasing power for future trades
• Avoid exposure to price swings

2. Hold USD-denominated value

USDC allows you to:

• Maintain exposure to USD within your crypto portfolio
• Protect against GBP depreciation relative to USD
• Keep funds ready within the crypto ecosystem

3. Diversify your crypto portfolio

• Add a stable asset alongside volatile cryptocurrencies
• Reduce overall portfolio volatility
• Balance risk across different asset types

Visual separation for clarity:

Your portfolio displays:

• Crypto: All non-stablecoin holdings (Bitcoin, Ethereum, etc.)
• Stablecoins: USDC shown separately
• Total account value: Combined total of crypto + stablecoins
• Profit & Loss: Overall P&L across all holdings

Buying USDC:

• Use GBP from your IG accounts
• Same 1.49% spread applies
• USDC appears in your stablecoins section

Selling USDC:

• Convert back to GBP at any time
• Proceeds return to your selected IG account
• Same 1.49% spread applies

Important differences:

To use funds for other IG products:

1. Sell USDC for GBP
2. Proceeds go to your selected IG account
3. Then use GBP for other products

1. Taking profits during a rally

Market scenario: Bitcoin up 20% and you want to secure gains

• Sell BTC to USDC to lock in profits
• Your value is now stable, protected from further price swings
• Funds remain in your crypto portfolio, ready for future opportunities

2. Waiting for buying opportunities

Market scenario: Expecting a price drop and want to buy the dip

• Hold USDC instead of volatile cryptocurrencies
• When opportunity arrives, sell USDC and buy your desired crypto
• Maintain stable value while you wait

3. Reducing volatility exposure

Market scenario: Uncertain market conditions

• Move volatile holdings to USDC temporarily
• Protect value without exiting crypto entirely
• Re-enter volatile assets when you're ready

4. USD exposure for UK investors

Market scenario: You want exposure to USD strength

• Hold USDC to benefit if USD strengthens against GBP
• Diversify currency exposure within your portfolio
• No need to open separate USD accounts

While USDC is designed for stability, be aware of:

Counterparty risk:

• Relies on Circle maintaining proper reserves
• Backed by audited, fully reserved assets

Regulatory risk:

• Stablecoin regulations continue to evolve
• Regulatory changes could impact USDC

Depegging risk:

• Rare but possible during extreme market stress
• Historical performance: maintained peg well

Exchange rate risk (for UK users):

• When viewing in GBP, you're exposed to GBP/USD exchange rate movements
• This is currency risk, not USDC risk

Best practices:

• Use as a stable store of value within your crypto portfolio
• Park profits temporarily without leaving crypto
• View in USD when trading USDC to see the true peg
• Understand it stays in crypto – cannot fund other IG products
• Include in portfolio diversification as a stable allocation

What USDC is NOT:

• Not a replacement for cash in your IG accounts
• Not for funding other trading products
• Not risk-free (though much lower risk than volatile cryptos)