Stablecoins and the Companies That Offer Them.

Stablecoins and the Companies That Offer Them
Stablecoins have exploded on the scene, while the companies that are offering them are launching IPOs. Should you dive in? Are there risks to weigh in the mix?
 
Below are the topics we’ll cover in this blog. Email [email protected] if you’d like a Crypto Stock Report Card.
 
The Most Popular Stablecoins
Have Stablecoins Ever Collapsed?
What Are the Risks of Stablecoins Now?
Investing in Crypto Companies
 
And here is more information on each of these topics.
 
The Most Popular Stablecoins
Below are five of the 10 most popular stablecoins by market capitalization. Some offer dividends, some offer rewards, while others offer a recognizable brand that their customers identify with.

Have Stablecoins Ever Collapsed?
The most famous collapse of a stablecoin was the Terra UST stablecoin collapse in May of 2022. Terra lost its dollar peg, which was based upon an algorithm rather than backed by U.S. dollars. Another challenge was the unsustainable interest rate of almost 20% that was promised to UST depositors. (Whenever you see an above-market interest rate, there are increased risks involved.) The bankruptcy of Terra’s UST stablecoin and the companion Luna coin wiped out $45 billion in market value. Most depositors and investors lost everything. The Genius Act was written to avert a similar disaster down the road by requiring stablecoin issuers “to hold at least one dollar of permitted reserves for every one dollar of stablecoins issued.” (Click to review an overview of the rules.)

Circle’s USDC stablecoin didn’t collapse, but it did break the buck in March of 2023. The coin experienced a liquidity crisis when Silicon Valley Bank collapsed. Why? Circle reportedly had $5 billion in uninsured deposits at the bank. When the FDIC and the Federal Reserve stepped in to guarantee uninsured depositors on March 12, 2023, Circle’s depositors were reassured. Today, the USDC stablecoin is the 2nd most popular, with a market capitalization of $16.7 billion.
 
It’s important to note that the Silicon Valley exception was based upon the “systemic risk exemption,” a special clause that will not be applied to all events or banks, in case of a bank failure. Deposits are only insured up to $250,000 at U.S. banks.

The Tether stablecoin lost its dollar peg in May of 2022 but has since recovered. USDT is the most popular stablecoin, with a market cap of $137.3 billion. According to Tether’s website, “Our reports demonstrate that our Reserves are greater than the redemption value of Tether Tokens in circulation on the dates reported.” Likewise, Circle boasts that their cash reserves are 1:1 with the coins in circulation.

What Are the Risks of Stablecoins Now?
Below are a few risks of holding stablecoins.
 

• Stablecoins are not federally insured like bank and credit union deposits are. In the event of bankruptcy or fraud, depositors have little recourse. Issuers are required to advise depositors of this, but we’ve seen some misleading marketing that might confuse investors into believing there is federal support.
• Silicon Valley Bank failed, which would have wiped out USDC (Circle’s stablecoin) depositors if the Feds hadn’t stepped in with an exception to make uninsured deposits whole. Do the stablecoin issuers have uninsured deposits in their reserves?
• We are placing our faith in the underlying issuer, which is the only backstop for a run on the coin or a liquidity crisis (such as happened when Terra Luna collapsed).
• A sudden rush of redemptions often causes a liquidity crisis (such as happened with Terra).
• There have been allegations of fraud and misrepresentation in some issuers. If/when depositors discover this, they will rush to redeem their money causing a liquidity crisis and massive losses for most.
• Cybersecurity, network outages and payment gateway glitches can erode depositor confidence, and cause liquidity crises and a run on the coin.
• Compliance costs. Stablecoins are regulated and are required to issue regular reports on their 1:1 dollar peg. This adds to the costs of operations.
• Scams abound, particularly targeted at crypto wallets. There is little recourse once funds are delivered to the shyster. In my private coaching practice, I’ve seen many unsuspecting investors be stripped of tens of thousands of dollars that they have little hope of ever recovering.

 
Investing in Crypto Companies
There has been a wave of new crypto IPOs, including Circle Internet Group (CRCL), Gemini Space Station IPO (GEMI), Strategy Inc. (MSTR), Figure Technology (FIGR) and the upcoming ReserveOne SPAC (MBAV). Circle soared at the IPO on June 6, 2025, rising from $107/share to almost $300/share by June 20, 2025. The share price is currently at $130. Gemini has been as high as $45/share but is currently trading at $33.55.
 
We’ve also seen the epic fraud failure of FTX, which had the support of many celebrities. The CEO, Sam Bankman-Fried, was on the cover of Fortune magazine just three months before the FTX collapse. SBF was featured as “the Next Warren Buffett?”

Perhaps the most important considerations are Crypto Winters. We’ve seen a historic trend where crypto prices shoot the moon the year after a Bitcoin halving, only to plunge into a Crypto Winter by the 2nd year anniversary. April 19, 2025, marked the 1-year anniversary of the Bitcoin halving. Will crypto prices continue at all-time highs as we edge closer to April 19, 2026, or will prices plunge as they have two years after the last two halvings? Learn more in my 2024 Investment of the Year blog, when we first reported on this trend, and predicted that Bitcoin could be the best investment of 2024.

Bitcoin’s 2023 and 2024 returns (over 2X gains) make the stock market’s impressive gains of over 50% cumulatively over that 2-year period look rather modest.

However, in Crypto Winters, the coins can lose 2/3rds or more of their value. (Stablecoins are supposed to maintain their dollar-peg and value, at least in theory.) Publicly traded crypto companies, including Coinbase, Mara Holdings and even crypto-friendly brokerages such as Robinhood, tend to lose 90% of their value at the Crypto Winter lows.

Bottom Line
Be aware of the risks of stablecoins, especially those that offer an above-market interest rate. Stablecoins are not always stable and some carry more risk than is appropriate for the fixed income side of our portfolio, where we aim to preserve principal and our wealth, while earning a safe, reliable income. Investors and depositors can get a comparable, government-backed interest rate with bank Certificates of Deposit. C.D.s are less likely to be targeted by crypto fraudsters. If we're looking for performance, stocks, including Bitcoin and Ethereum ETFs (which can be placed in tax-protected retirement accounts), offer superior performance (and more risk).

An age-appropriate, diversified plan that we rebalance 1-3 times a year can offer performance and protection. Learn more in my Get Safe & Hot With 1 Easy Plan blog. 

Crypto coins and stocks are very popular right now but experience extreme volatility and losses during Crypto Winters. The plunges are the result of whales taking profits at the expense of Main Street investors’ tendency to HODL*.
*Hold on for Dear Life

While holding on during a Crypto Winter has ultimately led to gains, there is no guarantee that will continue to be the case. Additionally, during the 18-36 month period of Crypto Winter losses, when coins are out of favor, cryptophiles can lose half or more of their wealth, while their FICO score plunges. This can make life very difficult and lead to financial and mental health crises. There have been suicides that were attributed to Crypto Winters.



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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money (6th edition) and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is (2nd edition) are the most recent releases of these books. Follow her on Instagram. 
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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly-traded companies, funds or projects mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect an age-appropriate, diversified wealth plan, which has been designed strategically, with the assistance of financial professionals who are familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge, patience and diversified strategy.  
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Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.