Stablecoins have recently become a focal point in capital markets—
The IPO of Circle, known as "America's first stablecoin stock," drew significant investor enthusiasm. As the issuer of USDC, the second-largest stablecoin by market cap, Circle's shares surged 168% above their $31 offering price on the first trading day and continued to climb. Similarly, in Asia, Guotai Junan International, which secured a Hong Kong cryptocurrency trading license on June 25, closed with a 198.4% gain. These events underscore the rising capital market interest in stablecoins.
With stablecoin legislation advancing in the U.S., Hong Kong, and elsewhere, tech giants like JD.com and Ant International are preparing to launch their own stablecoins in Hong Kong. Beyond corporations, individual investors also view stablecoins as a promising new "asset class," often declaring, "If you missed Bitcoin, don’t miss stablecoins."
Are Stablecoins Really a Golden Opportunity for Investors?
The current hype stems largely from retail investors’ limited understanding and inflated expectations. Stablecoins are frequently mistaken for speculative assets like Bitcoin, when in reality, they function primarily as payment tools with no appreciation potential. Their current use cases remain narrow.
However, as blockchain technology reshapes finance, stablecoins have emerged as a critical component of the digital economy—serving as both a "stability anchor" for volatile crypto assets and a catalyst for Web3 and decentralized finance (DeFi).
Key Questions Explored:
- When will stablecoins achieve true stability?
- What are their inherent risks?
- How do they shape the Web3 ecosystem?
What Are Stablecoins?
Stablecoins are cryptocurrencies pegged to external assets (e.g., fiat currencies like the USD or commodity baskets). Designed to mitigate crypto market volatility, they provide a "value anchor" for on-chain finance while preserving blockchain benefits (transparency, decentralization, efficiency).
Core Attributes:
- Value Stability: Maintain a fixed exchange ratio with the pegged asset.
- Crypto Nature: Retain blockchain advantages (e.g., programmability, global settlement).
Four Primary Types:
| Type | Mechanism | Pros/Cons | Examples |
|-----------------------|---------------------------------------------------------------------------|---------------------------------------------------------------------------|------------------------|
| Fiat-Collateralized | Backed 1:1 by fiat reserves (e.g., USD) | + Simple, high stability (if audited)
– Centralization risk | USDT, USDC, BUSD |
| Crypto-Collateralized | Overcollateralized with crypto (e.g., ETH) | + Decentralized
– Complex, capital-inefficient | DAI, sUSD |
| Algorithmic | Algorithmic supply control (minimal/no collateral) | + Capital-efficient
– Prone to "death spirals" (e.g., UST collapse) | UST (defunct), FRAX |
| Commodity-Backed | Pegged to physical assets (e.g., gold) | + Inflation hedge
– Low liquidity | Paxos Gold, Tether Gold|
Why Do Stablecoins Matter?
Cryptocurrencies like Bitcoin are too volatile for daily transactions (e.g., buying coffee). Stablecoins bridge this gap by enabling:
- Crypto trading pairs
- DeFi lending/borrowing
- Cross-border payments (e.g., Africa’s USD liquidity crunches)
- Web3 payrolls/Treasury management
👉 How stablecoins revolutionize remittances
But Will They Replace Fiat?
No. Stablecoins lack sovereign backing (no tax/legal framework). Risks include:
- Depegging events
- Regulatory crackdowns
- Centralization failures (e.g., issuer bankruptcy)
Regulators are responding via:
- Reserve transparency mandates
- Global coordination (e.g., Basel III-style rules)
- CBDC acceleration
Stablecoins in Web3’s Future
As DeFi’s "stability anchor," stablecoins underpin:
- DEX liquidity pools
- Tokenized real-world assets (RWAs)
- GameFi economies
Challenges remain—trust, scalability, compliance—but their role as a bridge between TradFi and Web3 is undeniable.
FAQ
Q: Can stablecoins appreciate in value?
A: No. Their purpose is price stability, not investment returns.
Q: Are algorithmic stablecoins safe?
A: Historically risky (see TerraUSD collapse). Hybrid models (e.g., FRAX) are more resilient.
Q: How do regulators view stablecoins?
A: As systemic risks. Expect stricter reserve/audit rules globally.
👉 Explore compliant stablecoin projects
Final Thought:
Stablecoins are reshaping finance, but true "stability" hinges on regulatory clarity, technological robustness, and mass adoption. Their potential is vast—if challenges are met.