Stablecoins: Crypto’s Trojan Horse to Mass Adoption

Stablecoins: Crypto’s Trojan Horse to Mass Adoption

Back in the early 2010s, I remember trying to get the owner of a Brooklyn bodega to accept bitcoin as payment for groceries.

At the time, bitcoin was trading around a few hundred dollars. But I believed it was the future of money. So I became an evangelist, sharing the bitcoin gospel with the masses.

Here was a new asset that allowed you to store your money outside the traditional financial system. But unlike physical gold, it’s digital… Meaning you could send it to anyone anywhere in the world at any time with just the click of a mouse.

It essentially gave you the freedom to become your own bank. You didn’t need to trust a third party to hold it on your behalf. You retain complete control over your money.

On top of that, this cool new tech had a fixed supply, making it disinflationary. You can’t “print” more bitcoin like you can with dollars and other fiat currencies. That made it an inflation-resistant asset as well as a non-custodial asset.

Even though bitcoin was novel money – the network launched in 2009 – the bodega owner was initially willing to accept it as payment.

But there was a problem… The transaction would take at least 10 minutes to go through. He didn’t want to wait that long. So I ended up paying him in dollars.

Too bad for him. Back then, bitcoin was trading around $129 per token. That grocery bill payment would’ve been worth about $107,000 today.

Looking back, I can’t really blame the bodega owner for his decision. Although bitcoin is the sixth-most valuable asset in the world today by market cap, it’s still rarely used for payments.

And that seems to go against bitcoin’s original ethos…

Satoshi Nakamoto, the pseudonymous creator of bitcoin, developed it specifically as a form of payment. In his (or their) famous 2008 white paper outlining the concept, Satoshi wrote:

For better or worse, bitcoin is now seeing widespread adoption primarily as a monetary asset… Not as payment technology.

In other words, bitcoin is becoming a rival to reserve assets like gold and the U.S. dollar. It’s not a rival to Apple Pay, Google Pay, Cash App, PayPal, or Venmo.

But bitcoin’s growing acceptance by Wall Street, corporations, and even national governments is paving the way for crypto payment solutions. (This is all part of a trend we call The Convergence. More on this below.)

There’s just one technological gap they need to cross before we get to mass adoption… And a bridge is coming soon.

A New Crypto Payment Option

A major roadblock to bitcoin’s adoption as a form of payment is volatility. In bitcoin’s early days, it could see double-digit swings in just a few hours.

Let’s say I used bitcoin to buy $100 worth of groceries from my neighborhood bodega at noon… By midnight, it could be worth as much as $150 (peeving me) or as little as $50 (peeving the bodega owner).

Another roadblock was bitcoin’s early outsider status: It wasn’t connected to traditional digital payment rails. That made transactions like credit card chargebacks and refunds difficult – if not impossible – to complete.

Despite those drawbacks, bitcoin has become the most valuable monetary asset in the world outside of gold. And in the future, we believe it’ll eventually surpass the shiny yellow metal as the world’s most valuable asset by market cap.

But bitcoin’s transformation into a monetary asset hasn’t killed Satoshi’s vision “of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

A new class of altcoins is fulfilling that role. I’m talking about stablecoins. And they solve one of crypto’s biggest problems: Volatility.

A stablecoin is a cryptocurrency with a fixed price. It’s designed to maintain a stable value. Many of them are pegged to the U.S. dollar (USD) and trade at or near $1.

They’re popular among unbanked populations because, as digital assets, they enable anyone to send value to anyone else anywhere in the world at any time.

And they’re growing like gangbusters.

Last year, stablecoin transfer volume reached $27.6 trillion, surpassing the combined volumes of Visa and Mastercard.

To be clear, the vast majority of this volume is on-chain… Meaning stablecoins are primarily used to facilitate the trade of other cryptocurrencies.

But I believe we’re on the verge of a breakthrough in stablecoin technology. And it’ll unleash all of that pent-up capital on the retail market.

The Final Frontier: Tap and Pay Crypto

In my view, there’s one major obstacle holding back the mass adoption of stablecoins: The inability to “tap and pay” at the point of sale (POS).

Sure, you can send thousands of dollars’ worth of stablecoins to family members back home in Guadalajara or Mumbai over the internet for just pennies…

But you can’t use stablecoins to pay for gas at the pump or a bottle of water at the convenience store by tapping your card or phone at a register.

This is insane. Stablecoins are digital assets that live in digital wallets. So you’d think it would be simple to set up contactless payment for them.

I won’t get into all the details, but stablecoins aren’t widely accepted for “tap and pay” transactions because many POS systems don’t currently have the technology to support them.

But as I’ll show you in a moment, that technology is on the way. And it will be explosive for stablecoins.

Consider Square’s Cash App as an example.

It’s one of the best payment apps available today. The design is clean. It’s simple to use. And it allows you to send dollars back and forth without ever pulling out your wallet.

Today, more than 57 million businesses around the world rely on Square’s cashless system.

Here’s the thing: The legacy technology that runs many payment rails isn’t compatible with blockchain technology. But we’re seeing breakthroughs on that front.

One example is Stripe. If you’ve ever made a mobile or online payment or used a credit card reader at a retailer, your payment likely went through Stripe’s payment rails.

Last year, it processed $1.4 trillion in payments, which is almost 5% of U.S. GDP. In the coming years, I believe stablecoins will account for a great deal of those payments.

Here’s why…

In February, Stripe acquired stablecoin company Bridge for $1.1 billion. And earlier this month, it acquired crypto wallet developer Privy for an undisclosed amount.

The Privy acquisition is the one that really excites me.

The company specializes in embedding cryptocurrency wallets directly into websites and apps, removing the need for users to interact with third-party tools like MetaMask or Coinbase.

Privy supports over 75 million active accounts… And according to the company, its wallets are tied to billions of dollars in transaction volume, with use cases spanning payments, payroll, trading, and social applications.

Stripe isn’t the only major payment processor adopting stablecoins. Visa and MasterCard are also launching their own networks.

Last year, Visa expanded stablecoin settlement capabilities over VisaNet. And Mastercard launched a stablecoin digital wallet last year to allow retail customers in the Asia-Pacific region to spend their stablecoins anywhere Mastercard is accepted.

I can give you plenty more examples of companies considering adopting stablecoin technology – from major retailers like Amazon and Walmart to banking giants like JPMorgan Chase and Bank of America.

But I think you get my point.

Just like bitcoin is seeing widespread adoption as a monetary asset… I believe stablecoins will see widespread adoption as payment solutions.

How to Play This Trend

Being able to “tap and pay” at the final POS is the last frontier for crypto mass adoption.

This capability will allow blockchain tech to completely, seamlessly replace legacy financial rails. And it will all happen behind the scenes. We won’t even know it.

It’s just a matter of time before services like Apple Pay, Google Pay, and Cash App adopt stablecoins.

And get this… With stablecoins, you can deposit any change from your transactions back into your wallet, which you can link to your brokerage or crypto exchange account.

You can literally use the loose “change” from your purchases to invest in crypto and stocks. And you’ll have much more loose change with stablecoins. Unlike credit cards, which charge transaction fees as high as 4%, stablecoin fees are in the pennies.

That’s the future in front of us. And it’s incredibly bright.

So how do we play this?

Most stablecoins launch on the Ethereum and Solana networks. While I’m bullish on both, I believe a smaller class of altcoins will outperform them as stablecoins take the world by storm.

We call them “crypto payout” tokens.

Crypto payout tokens help facilitate payment rails for stablecoin issuers.

While Ethereum and Solana are both blue-chip cryptos, neither generate yield on their own. But many crypto payout tokens either have their own stablecoins that pay yields… Or allow you to generate yield from Solana or Ethereum.

What makes these tokens unique is that – unlike stablecoins issued by companies like Stripe and Visa – they have automatic payouts that generate income month after month after month… No matter what’s happening in the market.

That’s why we call them crypto payout coins.

It’s somewhat similar to the way some stocks pay dividends. Instead of receiving cash, though, you receive more of the underlying crypto.

These recent developments that will ultimately boost crypto payout coins are all part of a phenomenon we call The Convergence. If you’re not familiar with The Convergence, it’s the confluence of three major trends…

The launch of exchange-traded funds (ETFs) focused on crypto income tokens… A friendlier regulatory landscape… And mass financialization of crypto products leading to global institutional adoption. (You can learn more by going here.)

When we first introduced our research on The Convergence, bitcoin was trading a hair below $54,000. Since then, it’s traded as high as $112,000. Over the coming years, we believe it’ll eventually trade as high as $1 million.

But we believe crypto income coins will perform even better.

As The Convergence unfolds, our research suggests much of the liquidity from the stablecoin market’s growth will flow into the tiny subsector of crypto tokens we cover that have automatic payouts.

Teeka recently held a special briefing to explain how these catalysts will push crypto payout tokens much higher. He also shared details about six crypto payout tokens we’re targeting in this niche sector.

You can stream the replay right here.

For most of its existence, volatility has been a barrier for crypto as a form of payment. Stablecoins solve that problem. They’ll serve as a bridge between traditional finance (TradFi) and decentralized finance (DeFi).

The ability to “tap and pay” at the POS is the last breakthrough these altcoins need to make before mass adoption. Once they clear that hurdle, it’ll be like a runaway freight train. Now’s the time to buy your ticket.

Stay curious,

Graham Friedman