Jim Bianco
+ Your AuthorsArchive @biancoresearch President of Bianco Research LLC. We specialize in macro analysis for institutional investors. We are an affiliated company of Arbor Research & Trading LLC Jun. 02, 2021 3 min read

Thread about stablecoins/Tether(USDT) to pushback on the FUD about USDT.

Something bigger is happening, the next reserve currency!


@nic__carter @BanklessHQ @TrustlessState @RyanSAdams @CamiRusso @LynAldenContact @TheStalwart @DappUniversity @VitalikButerin

Bottom line, Tether is never redeemed, so the Trust is more or less irrelevant.
Stablecoins are a trading pairs and transfer tokens in wallets. They are not a money market funds like Tim Massad opined.

Staking pools are like money markets.



And this is what makes stablecoins so powerful, and worrisome to regulators/TradFi. They are backed by the same thing as the $$$, full faith and credit...of the crypto universe!

USDT's problem is its centralized. A decentralized stablecoin (DAI, LUSD) has more potential.


If decentralized non-trust stablecoins are accepted as 1:1 to the dollar, then they are close to replacing the dollar as the reserve currency. This will happen when the dollar is pegged to stablecoins, or the opposite of now.

This might not be that far away.

I'll explain.


First the FUD chart that has nocoiners screaming ponzi. A breakdown of the USDT Trust.

Only 4% of the trust is in actual cash (although another 7% is in RRP and TBills, which the banking systems accepts as a cash substitutes).


Tim Massad worried today that a redemption wave would cause USDT to plunge, "breaking the buck" like the Reserve Fund in September 2008.

Problem is USDT never gets redeemed. Circulating supply never goes down. Not crypto winter (2019) , not March 2020, not last month.


Part of the reason is it never gets redeemed is almost none of its $60+ billion market cap is held on exchanges.

As these two charts show, only $2 billion is held on exchanges, or about 3% of circulating supply, less than cash in the trust.


And of the exchange balances, five Asian exchanges hold virtually all of it, headline by Huobi (South Korean, HQ Seychelles). It has half.

The rest ($58B +) is in wallets used as a trading pair or for transfers. 18% is tied in smart contracts


The DAILY turnover of stablecoins is 3x - 5x of mkt cap, or about $200B/day. Glassnode estimates about one-quarter, or $50B of this volume, is transfers. The rest is part of a trading pair.

About two-thirds of DAILY crypto volume is stablecoins.



So what does all this mean?

The crypto universe is creating the next reserve currency, a stablecoin. They will accept it 1:1 for the dollar, WITHOUT a verified trust. It is the majority of trading pairs and has huge transfers volumes.


My guess is the next reserve currency will NOT be USDT, in its current form. If USDT decentralizes (moves to a DAO?) or another decentralized stablecoin rises, it has a chance to be the next rese

This is why the alarm bells went off at the Fed, they went from studying CBDCs for the next few years to issuing a position paper this summer.

They know what's coming (crypto stablecoin to replace the $$$) and have to get ahead of it, if they can.



If stablecoins continue to hold their peg, like they did last month, acceptance will go parabolic.

The Pegs held on DEXs, they did not on CEXs, but that exposes CEX problems, not stablecoins problems, as I explained here.


Once confidence in the Peg is established, then wallet transfers of stablecoins will start to replace bank transfers as a main payment rail. Visa USDC payments is coming and someone like OPEC might not be that far away (crude priced in stablecoins? Petro-cryptos!)


TradFi cannot compete with stablecoin wallet transfers, especially after the Peg is trusted, and Layer 2/ETH2 collapse gas.

This will be the massive use case, stablecoin payments! Conquer payments = next reserve currency.

DeFi will soar servicing these stablecoins.


The center of the crypto universe is now stablecoins, they make everything go.

While a centralized USDT is not the long term answer, the fact that its Trust is ignored offers a roadmap for the big use case in crypto, as a payment rail.

Constructive comments welcomed.


You can follow @biancoresearch.


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