I will say that the major reasons why people invest in Bitcoin more than altcoins is because of Bitcoin is more valuable and is more reputable than them, so when you come in terms of comparison between bitcoin and the stable coins you can see that bitcoin do appreciate in value and the altcoin sometimes does not appreciate in value like Bitcoin so that is why many people ventured into bitcoin investment more than unstable coins
The definition of stablecoin is, that USD or any other fiat backs it.
This is free market, everyone can launch their own project whether it'd value depends on its demand and supply or like USDT, its value is pegged to USD but we never know the creator actually has reserves for the printed tokens or if they just do it out of thin air that's why it's not suitable for holding and people mainly uses it for trading.
you are right but the thing is that sometimes those coins or those tokens we think that is not going to be valuable later after people have know them and they gathered influence they can be valuable, most of the tokens today that is valuable in the market started one day and today they are recognised, even bitcoin it happens to bitcoin also because when it started many people who is around knows bitcoin today did not values it when it starts.
Stablecoins as the name express is greatly known for its suppression to fluctuation and volatility that other cryptocurrencies like bitcoin is known for. And it's as a result of the nature of their stability that traders hold their asset in stable to retain it's value within the short time before use for trade. Hence the stability, a lot of persons have made losses leaving their money in a stablecoin project that was built on a scam exit plan.
that is why it is advisable to make a necessary research in any of the altcoin project that you want to invest on because so many of the altcoins is not a project that you can invest on without a proper research...if you don't want to be scam in new launched project make sure you check the method of the awareness, its the awareness that will determine if the project is real or not, many people who invest in such projects do make research properly before they invest on it.
Unbacked stablecoins should be illegal
Well, that would require government regulation, and all the crypto enthusiast think that it's the root of all evil and the government shouldn't be trying to protect them from scams. A lot of things in crypto should be illegal but aren't because regulators don't want to tire themselves with the hard work of enforcing bans. For example, creating a token with a promise that it will work and have some features, and later failing to deliver that due to lack of trying is essentially a scam, yet it has never been classified as such so scammers can completely legally do that.
that is why I have been emphasizing on research because if you make a proper research in any of the token Project that you want to invest on that will be enable you to know if the project is a scam or not a scam because through that you know their objective of existence, I don't think anybody is ready to figure out a project that is a scam or a project that is not a scam so provided that cryptocurrency is involved they may be existence of a scam project token.