A rate cut by the Federal Reserve could help boost Bitcoin and other risk assets, but some stablecoin issuers could see their revenues take a hit. Stablecoins are currently the 18th largest holder of U.S. Treasuries, with more than $120 billion backing different currencies, and Bernstein recently called it an increasingly “systemically important” asset class. According to CryptoQuant data, Tether (USDT) and USD Coin (USDC) dominate the market, accounting for 70% and 21% respectively. Kevin Lehtiniitty, CEO of payments and stablecoin liquidity company Borderless. Infrastructure companies. “As rates start to come down, that’s going to have a huge impact on their (profits and losses) and their bottom line.” “They’re really stuck in this box and the rates are what determines their revenue,” he added. “You’re going to start to see more fees start to accrue…fees around minting or burning tokens, fees around trading tokens, and that’s going to really reduce the value proposition of using a particular token.” Stablecoins – The Promise and Another A cryptocurrency that is pegged to a fixed value of an asset (usually the U.S. dollar) — widely seen as the killer app for cryptocurrencies. Their market capitalization of around $170 billion has reached an all-time high in recent weeks as investors have poured money into them while waiting for Bitcoin to move meaningfully in one direction or another. Today, they are primarily used for trading and as collateral in decentralized finance (DeFi), with cryptocurrency investors closely following their activity for evidence of market demand, liquidity, and activity. However, due to their underlying blockchain technology, they are also becoming increasingly popular for their ability to move U.S. dollars faster – allowing for many non-transactional uses, such as saving money abroad in U.S. dollars, getting better Currency exchange rates, earn income, send money internationally. HC Wainwright analyst Kevin Dede said in a recent report that by “increasing the velocity of money,” stablecoins can make capital more accessible and mobile, accelerate economic activity and improve financial efficiency. Jeremy Allaire, CEO of Circle, the issuer of USDC, told CNBC that lower interest rates are “a very good thing” for the company, as lower rates could lead to increased investment and economic activity, which will benefit the company. “Lower interest rates mean more capital will be put to work…the velocity of money will increase and the demand for the technological utility that has the highest velocity of money in the world, which is stablecoin currency, will grow,” he said. However, the company will continue to diversify its revenue sources. Allaire emphasized that Circle’s core product transcends the USDC coin itself and becomes an “internet-scale network utility,” a stablecoin network open to developers and financial institutions in addition to individual users. For example, payments company Stripe allows U.S. merchants to accept USDC payments for online transactions. “We are well-positioned to continue to provide the platform, the infrastructure and the utility to make that happen and, of course, be the issuer of a digital dollar, a digital euro, etc.,” he said. “What you should expect from Circle is that we will develop new products that we monetize independently of the USDC in circulation,” he added. “What really matters is who has the biggest network — utility The most powerful, with the most applications and users, as well as developers building and connecting on these networks, just like any other network platform.”
