# Stablecoins risks

Stablecoins are designed to stay pegged to the value of the dollar (or other currency) but they do not always succeed in holding their value. Stablecomp analysts assign each stablecoin a position in the risk matrix based on parameters such as market cap, longevity, and type or category.\
\
**Stablecoins collateralization categories**\
\
Low risk: Fiat Collateralized Stablecoins\
Medium  risk: Over-collateralized Stablecoins with Crypto or ibT (interest bearing tokens)\
High risk: Algorithmic stablecoins

In addition to individual risk ratings, the categories themselves have different risk levels.\
The FIAT collateralized stablecoins are generally the safest, while the algorithmic ones are the riskiest .The over-collateralized stablecoins generally belong in the medium risk category but some exceptions are categorized as higher or lower risk.

**Market cap**\
\
The market capitalization of a stablecoin reflects user confidence in a given asset. Stablecoin risk is divided into three levels based on market cap. 

Low risk:market capitalization > 1 billion USD\
Medium  risk:  100 million USD < market capitalization < 1 billion USD\
High risk: market capitalization < 100 million USD

**Longevity**\
\
Longevity is an essential factor for two reasons. First, rug pulls have usually occurred early in a project, within the first 120 days, so this is  considered a period of high risk. Second, longevity is an indicator of market trust, which in turn reduces the risk of panic that could result in a selling run that might make it impossible to hold the peg.

\
Low risk: one year or more\
Medium risk: six months or more but less than one year\
High risk: less than six months<br>


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