Why aren’t they subject to supply and demand curves changing their price?
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There are two big categories of stablecoins, one of which is far more stable than the other.
The first category is coins that have a reserve of some other asset, held in a trusted location. This is how Tether is managed. The issuing authority guarantees that you can exchange 1 of the stable coin for $1 (or some other fixed asset) and holds sufficient reserves to make that exchange. The result is that you get a cryptocurrency that compromises somewhat on avoiding a need to trust any central authority, but still allows anonymous exchanges. This style of stable coin is only as good as the trust in the backing authority, but with audits that trust can be reasonably high.
The other category is algorithmic stablecoins. They’re what have been in the tech news cycle most recently since a large one (Terra) just completely imploded. These coins introduce automatic mechanisms whereby coins are added or removed from the supply to target a specific valuation. In the case of Terra this is done by use of a secondary cryptocurrency that is *not* stable, called Luna. The idea here is that if Terra starts trading at $0.97 you could buy 100 Terra for $97 and destroy them, receiving in exchange $100 worth of Luna. In the process you push Terra’s price back towards $1.00. That process breaks down when people have a crisis of confidence in Luna. The algorithm only promises larger and larger quantities of Luna, but gives you no mechanism of converting that currency into something else.
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