We are going to see things get crazy in the stablecoin market.
This is something that was predicted. Ultimately, we are going to see tens of trillions of dollars in stablecoins out there. Most of them are asset backed, something that is likely going to be in compliance with regulators. Ultimately, I think algorithmic stablecoins are going to realize most of the market but that requires a lot of maturity.
For now, the market is expanding. We are seeing different variations emerging, some that are not being called stablecoins yet seek to maintain a peg.
What this means is the expansion could be massive. Of course, we are also looking at this coming from the traditional players.
US Treasury Backed Coins
Most are familiar with USDC and Tether (USDT).
These are the two most popular (and largest) stablecoins. They basically create a token for each dollar invested. The currency is then used to back the token either in the form of cash or a US Treasury.
It is the most common structure and is still being followed.
What is taking place now is some experimentation. Here is where things get very interesting.
BUIDL
The first is BUIDL. This is the product of the world's latest crypto bull, Larry Fink and Blackrock.
It was launched a week ago and, in that time, pulled in $245 million. This is technically being called a fund yet it aims for the 1:1 ratio with the US Dollar.
What does it do with the money?
BlackRock said the fund invests 100% of its assets in cash, U.S. Treasury bills, and repurchase agreements.
Will this be used as a medium of exchange? There is no guarantee. That said, it does offer the same potential if the peg holds. There is no reason why the tokens, which are ERC-20, cannot be swapped similar to USDC.
This is geared towards institutions, hence average individuals are not involved. Things could change in the future as regulation emerges and market conditions change.
The difference here is what happens to the yield paid from the Treasuries. With Tether and USDC, the companies keep all the profits. That is not the case with BUIDL. The investors are putting up money seeking a return. Blackrock will pay out the profits to the fund holders, minus whatever fees they charge.
USDA
For those who are outside the United States, a new player is emerging that could be of interest.
Angle released its stablecoin USDA. Like BUIDL, this one aims to pass on the yield. It also offers a slightly different twist.
It too is backed by US Treasuries. However, it also allows for the purchase of tokenized T-bills as their backing asset. This is the first time I came across this.
This company is also focusing upon the FOREX market. The goal is to provide a seamless swap between the dollar and EURO, eliminating fees and slippage.
To help matters along, the company decided to convert USDC.
To boost liquidity for USDA, users will also be able to convert Circle's USDC stablecoin to USDA and back without incurring fees or slippage.
This is on top of Mountain USD and Ethena's USDe raked in $300 million and $1.3 billion in deposits.
More Than Payments
Notice how we are dealing with a lot more than just payments. Stablecoins offer so much potential, something that Wall Street institutions are fully knowledgeable about.
In these instances, we see how there are going to be stablecoins designed for specific purposes. BUIDL is for institutions while USDA is focusing on the FOREX market. We will continue to be see tokens designed with use cases in mind.
This is also just the beginning.
Angle is showing how the layering works. By using tokenized treasuries as the backing, it is moving things to another level. Here we see the lines blurred slightly since the asset backing it is really only the value. This is an asset backed by an asset.
Here is where we are starting to see the tokenizing of real world assets. Consider what can be done with different funds, tokenized and then incorporated into a stablecoin in some manner.
We also have another reason why cryptocurrency is not going to disappear. As mentioned before, Wall Street is in the process of hijacking bitcoin. The most recent activity with ETFs proves this point. Where is the BTC ending up? In the hands of Wall Street institutions.
Thus, we see counterparty risk arising.
Now we are watching Wall Street positioning itself to "hijack" crypto. Naturally, the limitless nature of crypto means it cannot take over. However, it is inserting itself right in the middle of the innovation. This will likely accelerate as other institutions follow Blackrock's lead.
It will not be the last investment bank to enter this game.
We are going to see trillions of dollars in stablecoins created over the next few years. It is a market that is roughly $150 billion as of this moment. As more products are built in a similar manner, the need for the coins will expand.
According to Gemini, the total money market funds in the United States is $2.5 trillion. This is the first level to watch with stablecoins (in all the forms they will appear).