In a recent investment committee meeting, one of our members highlighted the significant growth in stablecoins and posed a critical question: How can we, as a fund, gain meaningful exposure to this rapidly expanding sector? Rather than responding off the cuff, I decided it would be valuable to thoroughly explore the various options available. Recognising that this analysis might be interesting to our broader community, I’ve turned our findings into this blog post.
The rise of Stablecoins
Stablecoins have emerged as arguably crypto’s most powerful and impactful innovation yet. Their explosive growth and adoption over the past several years underscore their critical role as a bridge between traditional finance and the blockchain-based economy. Right now, stablecoins might just be the true killer app for cryptocurrency.
Currently, the stablecoin market stands at a remarkable $233 billion, with Ethereum and Tron leading as dominant blockchains. Ethereum alone hosts around $126 billion in stablecoins, representing roughly 54% market share, while Tron is responsible for approximately $65 billion, about 28%. Both chains have reached new all-time highs in stablecoin supply, highlighting continued demand for digital dollars, particularly for decentralized finance (DeFi) and peer-to-peer transactions in developing regions. Additionally, Solana has recently seen rapid growth in stablecoin adoption, becoming increasingly significant with over $12 billion in stablecoins issued on its blockchain.
Total Stablecoin Supply (by issuer)
Figure 1: The growth in total stablecoin supply by issuer highlights the dominance of major players like Tether (USDT) and Circle (USDC), along with emerging issuers such as Ethena (USDe) and Sky (USDs). Source: DefiLlama
How Investors can Gain Exposure
There are three primary approaches to investing in stablecoins:
1. Investing in Blockchains Supporting Stablecoins
Ethereum and Tron are clear leaders, given their substantial stablecoin supply. Ethereum benefits from extensive DeFi usage, while Tron sees significant global use in peer-to-peer payments, particularly in emerging markets. Solana’s rapid recent growth also provides compelling exposure, driven by its high-speed, low-cost transactions that attract new stablecoin projects and users. Value accrues to these blockchains primarily through transaction fees, as increased stablecoin activity boosts network utilization, leading to higher demand for native tokens used to pay fees.
Total Stablecoin Supply per Chain
Figure 2: Breakdown of stablecoin supply across leading blockchains demonstrates Ethereum’s dominance, Tron’s substantial market share, and the recent rapid growth on Solana. Source: DefiLlama
2. Investing Directly in Stablecoin Issuers
The largest issuers, Tether (USDT) and Circle (USDC), unfortunately don’t offer direct investment opportunities through public stocks or tokens. However, emerging stablecoin projects with investable tokens present options for the curious investor to explore; however, these may come with additional risks, making thorough research paramount.
3. Investing in DeFi Protocols Using Stablecoins
Numerous DeFi platforms rely heavily on stablecoins for lending, borrowing, and yield generation. Protocols like Aave, Morpho Blue, and Spark offer indirect stablecoin exposure by benefiting from their growth, transaction volume, and yield.
Conclusion
Each approach offers unique benefits and considerations. While direct investment opportunities remain somewhat limited, exposure through leading blockchains, innovative stablecoin projects, and thriving DeFi protocols currently provide the most practical investment paths.
As stablecoin adoption accelerates globally, driven by demand for stable, borderless transactions and financial services, strategically positioned investors stand to benefit significantly in this rapidly evolving space.
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