Stablecoins have emerged as one of the fastest-growing segments of the crypto market. These digital coins are currently valued at over $250 billion and now have the attention of banks, major institutional investors, top retailers, and even the U.S. Treasury Department.
Everyone, it seems, is looking for a way to get involved with stablecoins. As a result, "stablecoin summer" has become the new buzz phrase in the crypto world.
So why have stablecoins suddenly taken off, and what are some of the best ways to invest in them?
New legislation
Much of the enthusiasm around stablecoins, which are simply cryptocurrencies pegged 1:1 to the U.S. dollar, can be traced back to passage of major new legislation in the Senate. This bill, known as the GENIUS Act, lays out rules for stablecoins, specifying things such as who can issue them and how they must be collateralized.
There's a competing piece of legislation in the House (known as the STABLE Act), so both chambers are expecting to work out a compromise (the Stable Genius Act?) that can be signed by President Donald Trump before the end of the summer. That is going to open the door further to financial institutions and large institutional investors getting involved with stablecoins.
Mainstream adoption
Currently, just two stablecoins -- Tether (USDT -0.02%) and USDC (USDC 0.00%) -- control about 85% of the market. But new entrants are set to arrive soon.
Image source: Getty Images.
In June, The Wall Street Journal reported that both Walmart and Amazon are exploring plans for stablecoins of their own. Top financial institutions and banks are rumored to be working on rival stablecoin projects. And some Silicon Valley tech giants could decide to launch them, just like PayPal did in 2023.
At the same time, the U.S. government has embraced them. According to Treasury Secretary Scott Bessent, stablecoins could reach a total market cap of $2 trillion within just a few years.
That's because stablecoin issuers have become some of the most enthusiastic buyers of short-term U.S. government debt. They can use Treasury bills to maintain the 1:1 peg with the dollar, and then simply watch the interest payments roll in.
What's fascinating is that all of these players have different reasons for embracing stablecoins. Some see them as a way of making cheap, fast payments on a 24/7 basis. Others view them as a way to generate higher yields.
Meanwhile, the Treasury Department sees them as a potential way to boost the value of the dollar, while bringing down interest payments on government debt.
How to invest in stablecoins
As a result, there are several ways to deploy stablecoins as part of an overall investment strategy. If the goal is simply to generate higher yields, then the best option is probably to buy stablecoins such as Tether or USDC, and then put them to work with popular yield strategies.
However, you could search out stablecoin issuers, and then invest in them directly. The trendy stablecoin play of this summer has been Circle Internet Group (CRCL 9.27%), the company behind USDC. It had its initial public offering on June 5 and is already up 150%.
Are stablecoins just a fad?
If you're a longtime crypto investor, "stablecoin summer" probably sounds familiar. Nearly every year, there's an attempt to make one cryptocurrency the coin of the summer. There has already been Solana Summer, for example. And don't forget about the DeFi Summer of 2020, which led to an absolutely epic run for little-known decentralized finance (DeFi) coins.
Just be aware: This is basically the same logic that leads to pop culture aficionados designating one song as "the song of the summer." That song is usually catchy, trendy, and light enough to listen to while hanging out at the beach or the pool. But it rarely has any long-term staying power.
So be careful about diving into the stablecoin pool headfirst. Some analysts are saying that Circle may have already peaked. Others say that stablecoins might just be a fad.
In short, you need to do your due diligence. Nobody enjoys doing homework during the summer, but it may save you from making a costly mistake later.
