While the Fed’s interest rate cuts are likely to lead to a rise in Bitcoin and other risky assets, some stablecoin issuers could see their revenues hit. Stablecoins are currently the 18th largest holder of U.S. government debt in total, with more than $120 billion of that backed by a variety of coins, and Bernstein recently described stablecoins as increasingly “systemically important.” It is called an asset class. According to CryptoQuant, Tether (USDT) and USD Coin (USDC) dominate the market, accounting for 70% and 21% respectively. “For most of these stablecoin issuers, the core business model is that the product is Free and retain all of the interest earned on the U.S. Treasuries that are being purchased.” infrastructure company. “When interest rates start to go down, it’s going to have a huge impact on (profit and loss) and on the bottom line.” “You’re going to start to see a lot more fees…fees on minting or burning tokens, maybe fees on trading tokens, and that’s really going to reduce the value proposition of using a particular token. ” Stablecoins – cryptocurrencies that promise a fixed value peg to another asset (usually the US dollar) – are widely seen as the killer app for cryptocurrencies. Bitcoin’s market capitalization of around $170 billion has reached an all-time high in recent weeks as investors park their money waiting for Bitcoin to move meaningfully in one direction. They are currently primarily used as collateral for trading and decentralized finance (DeFi), and crypto investors closely monitor their activity for evidence of demand, liquidity, and market activity. But it is also gaining popularity for its ability to move dollars faster thanks to the underlying blockchain technology. This enables many uses outside of trade, such as saving money in USD abroad, getting better currency exchange rates, earning yield, and sending money internationally. . HC Wainwright analyst Kevin Dede wrote in a recent note that stablecoins can “increase the velocity of money,” increasing capital access and liquidity, accelerating economic activity, and increasing financial efficiency. said that it can be done. Jeremy Allaire, CEO of USDC issuer Circle, told CNBC that lower interest rates would be a “very big deal” for the company, as lower interest rates would likely increase investment and economic activity, which would benefit the company. “That’s a good thing,” he said. “Lower interest rates mean more capital is put to work… which means more money in circulation, and demand for money in the world’s fastest money technology utility: stablecoins. “will increase,” he said. However, the company will continue to diversify its revenue sources. Allaire emphasized that Circle’s core product goes beyond the USDC coin itself to be an “internet-scale network utility” that provides an open stablecoin network for individual users as well as developers and financial institutions. . For example, payments company Stripe allows U.S. merchants to accept USDC payments for online transactions. “We’re in a good position to continue to provide the platform, infrastructure and utilities for that, and of course we’re the issuers of things like the digital dollar and the digital euro,” he said. “Expect Circle to develop new products that separate and monetize circulating USDC,” he added. “What really matters is who has the biggest network, who has the most utility, who has the most applications and users, who has the ability to build on that network, just like any other Internet platform. Some developers may be connecting.
