The argument to diversify out of US dollar stable coin lives on and must be repeated. 99% of anything in an asset class is too much and dangerous.
Given this unhealthy concentration, it is time to start thinking about moving away from dollars, or anything backed by dollars, like US dollar stable coins.
The chorus of dollar pessimists is growing. Well known investor Peter Schiff said” The US dollar is about to free fall. The only way to end America’s massive trade deficit is to end the dollar’s role as global reserve currency.”
Wow! He doesn’t mince words.
It is obvious that the US trade deficit is a problem. To correct this deficit, US exports need to increase, and imports decrease. If tariffs don’t do the trick, if they are too watered down, the dollar will have to devalue, and its role as the international reserve currency may be put into question.
Investors seem to be too complacent regarding risks to the US dollar, despite mounting evidence of weakening almost every day
The dollar view is particularly important for crypto investors in stable coins. Even if no action is taken to reduce dollar stable coin exposure, thought must be given to the possibility of doing something. Investing is about attempting to see the future, the future of a weaker dollar.
Regarding potential targets for US dollar flows, bitcoin and gold seem to make sense.
In sovereign stable coins, Mexican stable seems to make a lot of sense along with Euro, and perhaps Japanese yen.
Of the three, the Mexican peso stands out. The yield is good, the currency is off its low, and the economy has done well in these times of tariff uncertainty.
The yield on Etherfuse Cetes stable bonds is 7.3%, which is 3% higher than yields in the US.
2024 was a bad year for the Mexican peso, declining 19% in value versus the USD. From the start of 2025 to end of March it had a good run versus the dollar. Then, US tariffs were announced and went through the previous low point. It is now around 19.6, 6% up in value from the start of 2025, and about 6% from its low of 2025.
It’s true that a more favorable tariff stance towards auto suppliers, a one-off event, helped numb the sting of tariffs. And yes, President Trump vacillating on tariffs aided the currency too. But a lot of positive sentiment can be ascribed to the economy.
Inflation has been a persistent problem for Mexico and its Central Bank. To counter inflation, the central bank has kept the benchmark rate at a restrictive level of 11%. A restrictive rate did its job; inflation went to 3.59% in January and stayed at about 3.8% in February and March. The April number went up to 3.93%, a smidge below the government target of 4%. Stable to slightly higher inflation in the face of high interest rates shows economic strength.
Along with rising inflation, the Mexican unemployment rate fell to 2.2% in March, compared to 2.3% in March 2024. The 2.2% level was the lowest on record since the series of economic data started in 1994.
Steady inflation and rising employment are good economic signals. And a good economy can support the currency.
Mexican yields are good, and the economy is showing some strength. For those that want to lighten up on US dollars, Mexico may be a good place.
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.
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.
