Stablecoins to control 15% of US Treasury market? Experts say…

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  • Stablecoins could be a major US Treasury bills (bond market) player. 
  • Per Bitwise exec, stablecoins’ US Treasury holding could grow to 15%. 

As a seasoned crypto investor with a keen eye for market trends and a knack for spotting opportunities, I find the recent development surrounding stablecoins intriguing. The potential growth of stablecoins in the US Treasury bills market is not just a blip on the radar, but a significant shift that could redefine the landscape of both sectors.

Stablecoin issuers, such as Tether and Circle, frequently choose US Treasury bills as their primary reserve asset due to their security and liquidity. These assets help ensure a one-to-one backing for each stablecoin token they issue, making them crucial players in the market.

Based on the views of investment strategist Juan Leon, who works at digital asset manager Bitwise, it’s possible that the proportion of U.S. Treasury bills held in stablecoins might increase significantly, potentially rising from its current 1% to as high as 15%.

Currently, Stablecoins make up approximately 1% of U.S. Treasury bills. However, this figure could potentially increase to 15%, positioning Stablecoins among the top 3 largest holders.

Stablecoins: Not ‘baby whales?’

As a researcher, I recently responded to a Bloomberg report that underestimated the impact of stablecoins within the U.S. Treasury bills market. In my analysis, I highlighted their potential role and significance.

As per the report, since stablecoins only hold a 1% share of the market, their issuers can be likened to ‘small whales’ or entities with limited influence compared to other major players in the bond market.

As a researcher, I observed an intriguing trend: the digital economy is expanding at a rate three times faster than usual. Moreover, the prospect of a potential stablecoin framework in the United States could further hasten this dynamic sector’s growth.

She added that stablecoin went from $0- $170B in a few years and could grow faster to $1T when the US passes a stablecoin bill by 2025. 

The use of stablecoins is increasing at an exceptionally fast pace, with the growth from $170 billion to $1 trillion happening more swiftly than the initial rise from zero to $170 billion. Once stablecoins reach a value of $1 trillion, their purchases of treasury bills would outshine the 10 largest money market funds, placing them among the top three holders with over $800 billion in assets.

As a researcher, I find myself in agreement with Leon’s perspective. Much like Howard Lutnick, chairman of the prestigious American investment bank Cantor Fitzgerald, I too appreciate Tether’s approach. Specifically, I admire their decision to rely on US Treasury bills as a backup, which, in my view, has been instrumental in assisting with the payment of U.S. debt.

‘Tether has significantly advanced its service by allowing people in developing countries worldwide to possess USDT, a digital representation of the U.S dollar. Since USDT is backed by substantial U.S Treasury securities, the 300 million global users of USDT wallets are essentially assisting in managing our national debt.’

Speaking from his side, Quinn Thompson, the founder of Lekker Capital who specializes in cryptocurrency hedging, pointed out that Lutnick’s public support for Tether might indicate a shift or change.

Based on information from Coingecko, at the moment of this report, the total market value of stablecoins stood at approximately $169.5 billion. The top player in this sector is Tether’s USDT, holding a significant share of around $117 billion, while Circle’s USDC comes in second with $34.8 billion.

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2024-08-22 23:04