The main advantages of stablecoins is that they hedge against volatility in the cryptocurrency markets, and the volume, fees and margins are provided by directly interacting with the network rather than through brokers. This can reduce trading costs, specially in high value transactions where the network fees are small in comparison to the trade.

The main disadvantages are to do with exposure to risk: human error, security, systems and economic failures. Trades done on the blockchain are irreversible, so human error poses a financial risk up to the value of the connected wallet. Connecting to nodes on an anonymous network poses computer security risks, as does the chance of key theft by intruders who have access to a machine that's making the trade. These can be mitigated by limiting the amount of funds transacted at one time and using hardware wallets to sign transactions. Both trades and token storage are implemented via smart contracts, which may contain bugs that expose users to the risk of theft. The blockchain itself may fail, be compromised, or be overloaded at a critical time like in a financial crash or bank run. The tokens themselves must be carefully examined for economic failure conditions and directed exploits. Depending on the type of stablecoin these include rug pulls by the creators, malicious contract upgrades, the corruption or suppression of price oracles, economic attacks on algorithmic stablecoins. In the case of stablecoins backed by real assets, the user must trust that the assets are actually held for the duration that they hold the token. If the tokens are stored with a third party like an exchange, then the exchange may fail or fall victim to any of these risks and even if insured it may take years for insurers to pay out.

The amount of technical, economical and game theoretical knowledge needed to evaluate these risks makes stablecoins somewhat unattractive for institutional investors, and so it would be neglectful of them to invest a significant percentage of a portfolio in such technologies.
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