Opinion: Holding ETH is the best way to benefit from the stablecoin wave
Powered by ChatGPTFor most retail and institutional participants, $ETH offers the easiest exposure to the entire digital dollar ecosystem.
By:Maria Shen & Sanjay Shah,Electric Capital
*Note: In this article, "Ethereum" refers to the network, and "$ETH" refers to the asset that powers it.
Global demand for the dollar is not decreasing, but exploding. While news headlines focus on "de-dollarization," a more important trend is emerging: over 4 billion people and millions of businesses are actively seeking access to the dollar through stablecoins, representing the largest expansion of the dollar's network effects in decades.
This creates an unprecedented opportunity for Ethereum. Stablecoins provide global individuals with access to the dollar—growing 60x since 2020 to over $200 billion—and the millions of new dollar holders need more than just digital cash. They need yield, investment opportunities, and financial services. Traditional finance cannot serve this vast new market due to regulatory and infrastructure constraints.
Ethereum is uniquely positioned to provide the global financial infrastructure for this new digital dollar economy, and $ETH will directly benefit from this growth.
Millions of New Dollar Holders Enter Through Stablecoins
There is huge latent demand for the dollar from individuals and businesses globally.
People around the world want the safety of the dollar:
Over 4 billion people face significant monetary risk due to political instability, poor monetary policy, and structural inflation. (1)
An estimated 21% of the global population lives in countries with annual inflation rates exceeding 6%(2), rapidly eroding savings and purchasing power.
For these populations, holding dollars means financial security. The dollar is seen as a store of value, a means of cross-border transactions, and a hedge against local currency fluctuations.
Businesses need dollars to transact:
The dollar remains the dominant currency in global trade, with 88% of all foreign exchange transactions involving the dollar on at least one side. (3)
Businesses in emerging markets rely on dollar liquidity for international payments, imports, and supply chains, where local banks and foreign exchange markets are often limited or unstable.
Small and medium-sized enterprises and freelancers increasingly need digital dollars to get paid and avoid currency mismatch risk.
For the first time in history, anyone in the world can hold dollars through stablecoins:
Anyone with internet access can hold and transact in dollars—no bank required, no government permission needed, and available globally 24/7.
As a result, stablecoin market capitalization has grown 60x since 2020. (4)
Peak adoption is concentrated in emerging markets previously excluded from dollar-denominated finance. Nigeria has become the second-largest crypto market globally, while underground crypto adoption persists in China despite the ban. (5)
Stablecoins are creating a new class of dollar holders among the world's largest populations—businesses pricing in $USDT, families saving in USDC. They are driving a fundamental expansion of the market for dollar financial services.
These New Dollar Holders Seek Yield, Creating Opportunity for New Global Financial Infrastructure
Stablecoin holders want to put their money to work.
Today, millions can hold dollars through stablecoins. But their aspirations go far beyond that. Individuals and businesses naturally want to use their funds to earn yield, invest, and grow wealth.
Traditional finance cannot serve this new market:
The U.S. banking system requires regulatory compliance, excluding most global participants.
Cross-border financial services remain expensive, slow, and geographically restricted.
Traditional finance was built for institutions and high-net-worth individuals, not global retail.
Geographic and regulatory barriers prevent billions of dollars from participating in dollar-denominated finance.
This creates a need for new financial infrastructure that can serve billions of stablecoin holders globally, enabling them to put their new dollars to work.
Only Ethereum Meets All Three Requirements to Serve Global Stablecoin Holders
New financial infrastructure to serve stablecoin holders must simultaneously meet three key requirements:
Globally available—must be accessible anywhere with internet access, from New York to Nigeria to rural Nepal. Most of the world does not have access to dollar-based finance due to geography or regulation.
Institutionally safe—must provide the security, reliability, regulatory clarity, and customizability that institutions need to build multi-billion dollar financial products.
Resistant to government intervention—must be free from the control of any single government, as many governments would prefer to restrict the flow of dollars to protect local currencies and control capital flows.
Ethereum meets all three requirements:
Globally accessible: Ethereum is available 24/7 to anyone with an internet connection globally.
Institutionally safe:
Secure—the most economically secure and decentralized of all programmable blockchains. The most mature security infrastructure—with the most open-source developers, verified contracts, security auditors, and tooling.
Reliable—10 years of 100% uptime, regardless of market crashes or geopolitical events.
Regulatory compliant—U.S. regulators have classified $ETH as a commodity, providing a clear institutional framework.
Customizable—Ethereum's L1+L2 framework enables customizability, allowing institutions to optimize for specific use cases and meet regulatory requirements (e.g., Coinbase and Robinhood are both building L2 chains on Ethereum).
Exceptional track record—home to the world's largest digital financial economy: over $140 billion in stablecoin market cap(6), over $60 billion invested in decentralized finance (DeFi) protocols(7), and over $7 billion in real-world asset tokenization. (8)
Resistant to government intervention: No single point of control exists for a government to seize control or restrict the network.
Ethereum uniquely meets these requirements due to its robust decentralization—its origin story is nearly impossible to replicate today.
Strong decentralization makes Ethereum globally accessible, secure, reliable, and resistant to government intervention.
This level of decentralization is rooted in Ethereum's origins and culture.
Ethereum began as a community-funded, proof-of-work blockchain, which resulted in extremely broad asset ownership. Today's environment makes it unsuitable to launch in this way.
Its culture has always prioritized decentralization—maintaining expensive client diversity and resisting centralized shortcuts—a culture that is nearly impossible to retrofit.
As a result, Ethereum has decentralization advantages that other chains cannot easily replicate, providing Ethereum with a lasting moat.
Over 1 million validators(9)spread across 100+ countries(10)
Multiple independent development teams ensure resilience and the largest open-source developer ecosystem(11)
Broad asset ownership due to community-funded launch and proof-of-work origins
No other alternatives simultaneously meet all three requirements:
*Bitcoin may become more programmable in the future, but only if the Bitcoin community agrees to change the opcodes to enable this.
As $ETH Becomes the Reserve Asset of the New Digital Dollar Economy, Demand May Increase
What is a reserve asset?
In any financial system, a reserve asset is the trusted base layer that underpins everything. It is the collateral, savings, or liquid asset held by institutions, protocols, and users for value storage, loan guarantees, and transaction settlement.
In traditional systems, the dollar, U.S. Treasury bonds, and gold are examples of reserve assets because they are trustworthy, liquid, and widely accepted.
Why $ETH is a natural fit for this role
As billions of dollars flow through stablecoins on Ethereum, participants need a secure, permissionless, and efficient asset to support lending, staking, and yield generation. $ETH is uniquely positioned to do this because:
Scarce and trustworthy: $ETH has a predictable supply, low inflation, and is not centrally controlled.
Productive: Unlike gold or static dollars, $ETH generates yield through staking—similar to how real estate or treasury bonds generate income.
Collateral utility: $ETH is already the largest on-chain collateral asset in the Ethereum ecosystem, supporting $19 billion in lending protocols(12). Institutions hold it because they need it to access DeFi markets.
Seizure and censorship resistant: $ETH cannot be frozen or seized by governments, making it more resilient than centrally issued assets.
Programmable and liquid: $ETH is deeply integrated into the entire on-chain financial system and has unparalleled liquidity for large transactions.
Why this makes $ETH valuable
As more users hold stablecoins and need financial services, they need a reserve asset to support these activities. $ETH can earn yield, secure the network, and underpin DeFi lending—so as the system grows, demand for $ETH will naturally increase.
Simply put: More stablecoin adoption → more on-chain activity → more demand for $ETH as collateral → institutions and users hold more ETH.
L2s Expand Demand for $ETH
The growth of Ethereum Layer-2s further stimulates demand for ETH. By lowering transaction costs, speeding up transactions, and enabling new use cases, Layer-2s open up more areas where $ETH can be used as collateral. This expands the reach of $ETH and strengthens its position as a reserve asset for the digital dollar economy.
As Demand for $ETH Increases, It Is Also Expected to Become a Global Store of Value
The growing demand for $ETH also allows it to capture a large share of the traditional store of value market.
Like Bitcoin, Ethereum has superior store of value (SoV) properties compared to traditional assets like gold.
$ETH and BTC do not compete with each other, but are likely to take a share of the $500 trillion traditional SoV assets (gold, treasury bonds, stocks, real estate) in the coming years.
In addition to having Bitcoin's SoV attributes, $ETH also provides yield to holders.
Yield creation is a major benefit, as investors generally prefer yield-bearing assets. U.S. households hold approximately $32 trillion in dividend-paying stocks. (13), while they hold less than $1 trillion worth of gold.
$ETH has properties superior to traditional SoV assets and is able to provide yield:
Conclusion: Holding $ETH May Be the Best Way to Participate in the Growing Stablecoin Economy
The growth of the stablecoin economy establishes a strong flywheel for Ethereum and ETH.
As more stablecoins are put to use on Ethereum, demand for $ETH is strengthened. Higher $ETH value and a more secure network attract more institutions and services, further driving stablecoin adoption.
Alternatives face significant challenges in replicating this flywheel:
Traditional finance cannot serve the billions excluded by geographic and regulatory barriers.
Government-controlled systems remain subject to political influence and jurisdictional restrictions.
Bitcoin lacks the programmability for complex financial services.
Other blockchains lack the security, reliability, and customizability that institutions require, as well as the decentralization to resist government intervention.
The result: Holding $ETH may be the simplest and most effective way to gain exposure to the growing stablecoin economy.
You can also choose to invest in specific DeFi protocols that benefit from stablecoin expansion. But this is riskier and requires expertise.
For most retail and institutional participants, $ETH offers the easiest exposure to the entire digital dollar ecosystem.
Appendix
Risks to Watch
As with any emerging global system, Ethereum faces significant risks. Despite the many risks, three stand out as most threatening to the argument that "Ethereum will build a permissionless, dollar-based financial system with $ETH as the reserve asset."
The dollar becomes the reserve asset, not $ETH
If stablecoins like $USDC or $USDT become dominant and are used for lending, collateral, and settlement, the dollar may replace $ETH as the system's reserve asset. In this scenario, $ETH may be seen primarily as "gas money" rather than a core store of value. However, given that $ETH accounts for 44% of on-chain lending collateral on Ethereum mainnet and Layer2 and generates a 3-5% staking yield, replacing $ETH seems quite challenging. More importantly, $ETH is the only truly decentralized asset on Ethereum—stablecoins like $USDC and $USDT are centralized and can be frozen or seized, making them fundamentally unable to fulfill $ETH's role as censorship-resistant collateral. More likely, $ETH and the dollar will play complementary roles—the dollar dedicated to stability and transaction optimization, while $ETH provides decentralized, seizure-resistant value storage and network ownership.
CBDC competition replaces dollar stablecoin adoption
Central Bank Digital Currencies (CBDCs) can provide similar 24/7 digital dollar access with full sovereign backing, which could crowd out private stablecoins and limit the permissionless dollar system that Ethereum currently supports. CBDCs are inherently national, often lack true cross-border interoperability, and may limit open developer access due to compliance and identity requirements. In contrast, stablecoins have already completed trillions of dollars in settlements annually, operate globally by default, and maintain greater flexibility in innovation, making it difficult for CBDCs to replace them.
A competing chain surpasses Ethereum
A blockchain that is faster, cheaper, and initially less decentralized may be able to attract users and developers who value low fees and a simple user experience, and create strong liquidity and network effects early on. Over time, this chain may be able to mature its validator set enough to become "decentralized enough" to undermine Ethereum's dominance. However, given Ethereum's level of decentralization and over a decade of proven security, replacing it is no easy task.
Additional Data
Annual stablecoin settlement volume exceeds $6 trillion (10x growth since 2020):(14)
Ethereum holds over 55% of stablecoins:(15)
$ETH may become the reserve asset of the new financial system. 44% of lending collateral in the Ethereum ecosystem is $ETH, making it the largest collateral asset ($19 billion):(16)