SummaryWild price fluctuations of cryptocurrencies make it difficult for investors to maintain stable asset values. This study investigates the hedging properties of US dollar (USD)‐pegged stablecoins against bitcoin returns. We analyzed the hedging abilities of the three largest stablecoins—namely, Tether, USD Coin, and Binance USD—using the dynamic conditional correlation–generalized autoregressive conditional heteroskedasticity, dummy variable regression, vector autoregression, and impulse response functions. We found that stablecoins are generally negatively correlated with bitcoin returns, indicating that they can be effective hedging instruments against high‐volatility crypto assets. Among the stablecoins, Binance USD offers the largest risk reduction, and Tether was a weak safe haven during the COVID‐19 crisis period. Crypto investors can diversify their portfolios by holding stablecoins.