I can see using stable coins as a trading pair to purchase alts on a dex but I don't understand holding stable coins for longer periods of time like weeks, months or years as a store of value; to me this feels way too risky. What am I missing?
You hold stablecoin because of its easier to use to purchase other Cryptocurency when the market is experiencing a correction. Banks has procedure in releasing money and you might need an urgent purchase of your watched coin but due to the delay of the banks and its centralized system that could take you more time than just having a stablecoin in your wallet that within seconds or minutes you will be able to excute that transaction.
Stablecoin can also be stakes for stable returns and yes some merchant accept them for purchases. Most merchant convert their crypto transaction to stablecoin immediately the deal has been done and lastly stablecoin serve as a save heaven during market crash and I believe that is the main importance.