Author: North Household
When I first wrote about stablecoins last October, the total market value of stablecoins was only $170 billion. In the following months, with a hot on-chain market and continuous push from the U.S. government, the total market value of stablecoins has soared to $230 billion, growing by 35% in just over half a year. To put it dramatically, stablecoins have become a paradigm shift that macroeconomic research cannot ignore.
The current mainstream stablecoin issuance model is "collateralize 1 dollar, issue 1 dollar stablecoin". The issuer will use the collateralized dollars to purchase U.S. Treasury bonds and money market funds, using the interest as the company's income.
Looking at the two largest ones, $USDT has a market value of $150 billion, holding nearly $100 billion in U.S. Treasury bonds maturing within 3 months, plus $20 billion in reverse repos and money market funds; $USDC has a market value of $58.6 billion, holding $24 billion in U.S. Treasury bonds maturing within 3 months, plus $30.4 billion in reverse repos. Together, they hold a total amount of U.S. Treasury bonds close to that of South Korea.
This is consistent with the latest paper by BIS, which found:
(1) Whenever stablecoins experience a net capital inflow of about $3.5 billion (2 standard deviations), the 3-month Treasury bond yield will drop by 2 to 2.5 basis points within 10 days;
(2) When a capital outflow of the same scale occurs, the yield can rise by 6 to 8 basis points, showing a clear asymmetric effect;
(3) This impact is mainly concentrated on the short-end yield curve, almost not affecting long-term government bonds (because they buy short-term bonds);
(4) $USDT contributes the most to interest rate impact, accounting for 70% of the total impact (due to its large volume).
In terms of marginal purchase volume, from Q1 2024 to Q1 2025, $USDT and $USDC together have added $35.3 billion in U.S. Treasury bonds, which is on the same scale as the increase by the UK (+$42.9 billion) and Canada (+$56.8 billion), and the decrease by Japan (-$36.2 billion).
Furthermore, a recent NBER study delves into the structure of the U.S. Treasury market, dividing market players into two main categories:
One category is "granular-demand investors" with term preferences and institutional constraints, including commercial banks, insurance companies, pension funds, mutual funds, money market funds, foreign central banks, and private investors. Their allocation behavior is usually driven by duration matching, liquidity regulatory requirements, or yield targets. Their demand is not sensitive to price changes and has cross-term substitutability;
One major conclusion of the study is thatin the short-term U.S. Treasury market, arbitrageurs have high involvement and low risk, making the market more elastic (interest rates are less sensitive to supply and demand); in the long-term bond market, risks are higher, arbitrageur participation decreases, and prices are more sensitive to supply and demand. To quickly cash out large redemptions, stablecoin issuers can only hold highly liquid and safe assets (such as U.S. Treasury bonds maturing within 3 months), belonging to the first category of players in the U.S. Treasury market. As their scale expands, stablecoins are forming a new structural force that suppresses short-end interest rates.
How do stablecoins affect the U.S. money supply? When 1 dollar moves from a bank account to an on-chain stablecoin, it reduces the classic M1 and M2 statistics; however, as a shadow currency, it does not reduce the actual purchasing power in the economy. If stablecoins are used for daily payments rather than just trading and earning interest, their velocity of circulation V will be significantly higher than traditional currency.
But if 1 Argentine peso is directly converted to a U.S. dollar stablecoin, the impact would be too significant.
