Scott Bessent’s support for stablecoins, which are pegged to the US dollar, is opening doors for a potential influx of up to $34 trillion into decentralized finance (DeFi) platforms. Key beneficiaries could include projects like Ethena,
Ether.fi, and
Hyperliquid.
According to a recent blog post on Aug. 27 by
Arthur Hayes, Bessent envisions shifting substantial capital from the $13 trillion Eurodollar market and $21 trillion in retail deposits held in the Global South. The goal is to channel these funds into stablecoin systems that invest in US Treasury bills, ensuring consistent demand. The blog post can be found
here.
Hayes suggests this strategy addresses two crucial issues: the Treasury’s challenge in monitoring Eurodollar flows and the ongoing need for stable, price-insensitive purchasers of government debt.
The plan also leverages the vast reach of US social media platforms for wider stablecoin acceptance. For instance,
Meta’s WhatsApp could integrate crypto wallets for its billions of users globally, making stablecoin transactions seamless and bypassing traditional local banking systems.
DeFi Protocols Primed for Substantial Growth
To maintain their dollar peg, stablecoin issuers are required to invest customer deposits into Treasury bills. This creates a reliable and consistent demand for these government-issued securities.
Tether, for example, currently generates a net interest margin ranging from 4.25% to 4.5% through its holdings of T-bills, while paying no interest on its
USDT tokens. This business model can scale alongside deposit growth, providing Bessent with stable, insensitive buyers for short-term government debt.
Bessent aims to strengthen dollar dominance by pushing for widespread stablecoin adoption and can use various means to achieve this.
One example mentioned by Hayes includes the potential to exclude foreign banks from crucial Federal Reserve swap lines during periods of financial instability. Such actions could incentivize a shift of Eurodollar deposits towards US-regulated stablecoin platforms.
Hayes anticipates a total stablecoin market capitalization reaching $10 trillion by 2028. He identifies three specific protocols that are particularly well-positioned for long-term growth within this expanding ecosystem.
The first is
Ethena, which operates the
USDe synthetic dollar system. Ethena generates yield by shorting crypto derivatives against long positions. As of the current moment, Ethena has a total value locked (TVL) of $12.4 billion in its protocol.
Pathway to a 25% Market Share
The prediction suggests that USDe could potentially capture 25% of the total stablecoin market, reaching a total supply of $2.5 trillion.
Hayes also highlighted Ether.fi. This platform allows users to spend their crypto holdings via debit cards powered by Visa, enabling crypto spending anywhere Visa is accepted.
The platform is estimated to earn revenue at a rate similar to
JPMorgan’s 1.78% fee-to-deposit ratio. It is well-positioned to benefit from the expanding market for US dollar-pegged stablecoins.
The third protocol highlighted is Hyperliquid, a leader in the decentralized perpetual trading space, holding a 63% market share.
Furthermore, Hayes pointed out that Hyperliquid’s daily trading volume represents 26.4% of the entire stablecoin supply, indicating significant activity.
Considering the overall forecast of a $10 trillion stablecoin market, the involvement of these three protocols with stablecoins could generate substantial positive outcomes for them and their respective tokens.