In high-volatility markets, stablecoins serve as a hedge, reducing portfolio risk by maintaining value stability, typically pegged to fiat like the USD. Investment strategies include allocating 20-30% of a crypto portfolio to stablecoins to mitigate losses during downturns, as seen with assets like USDC or Tether. They act as a liquidity buffer, enabling quick reallocation to seize opportunities when prices drop. Stablecoins also facilitate arbitrage and DeFi yield farming, balancing risk and return. Their role in asset allocation is to anchor stability, diversify exposure, and preserve capital amid crypto market turbulence.