It makes no sense for 99% of the money investors have invested in stablecoins to pay no interest. Why own only US dollar stablecoins when there are other options, like non-US dollar short-term stable bonds?
An investor holding US dollar stablecoins is taking the risk of the US dollar devaluation. It can happen due to excessive US government debt and spending, a precipitous fall in interest rates under a new Fed President doing the President's will, and inflation that is not under control. If you are going to take these risks in a currency, you better get paid.
Inflation is probably the biggest risk. If interest rates are forced down, the US dollar will be less attractive to yield-based investors, reducing demand. At the same time, lower rates will stimulate inflation because the cost of borrowing money and spending will go down. In the end, no one wants to hold a low to no yielding currency if inflation is not under control.
To say that USD stable is the "only way" and deserves to be 99% of all stable coin is short-sighted and arrogant. The Chinese are giving the US a run for their money in stable coins and bonds. Over time, they can chip away at US dollar stablecoin's share.
The declaration that foreign consumers and investors will be excited to hold US dollars in an easy low-cost way (USDC) is a weak assertion. There is no doubt that on-chain assets are attractive to people in countries with undeveloped financial systems. US stock tokenization is proof, as it is opening access to dynamic US stocks to a whole new cohort of investors in markets with underdeveloped financial systems. But this makes sense because stocks have potential returns. The return potential for USDC or USDT without an interest rate is zero to low.
To put this into an investment example, let's say a crypto investor has 100% USDC. They can hold their USDC and get zero interest, or they can sell 50% of their USDC and invest in Etherfuse CETES stable bonds and get a yield. If the Etherfuse CETES yield is 6%, that is a 3% overall portfolio yield. If they diversify 50% into Etherfuse Brazilian Tesouros, then they can get 13% yield and have a blended yield of 6%.
To pick up yield and protect against dollar weakness diversifying away from US dollar stablecoin makes sense.
In the end, no one can claim that USD stable coin will lose its 99% market share in a short time. But, over time, 99% market share is unsustainable. Given this much market share is unlikely to hold, now is the time to get ahead of the market share shift. So, what are you waiting for?
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
