In the recent Unchained Podcast, “the block ghost of BitMEX”, Arthur Hayes said fiat-backed stablecoins like the USDC, USDT, and others pose a risk to the bonds market, and this is the primary concern for the United States.
Stablecoins make the bonds market fragile, USDC de-pegs
Arthur specifically pointed out the architecture of fiat-backed stablecoins and the need for the issuer to custody user funds before investing them in bonds, mostly in United States Treasuries, where they earn a yield.
This flow of funds to Treasuries makes the United States bonds market fragile.
Because stablecoin issuers claim that each token in circulation is backed 1:1 with the USD reserved in cash or cash equivalents like short-term treasuries, any spike in demand in redemption requisition will heap pressure on the bonds market, even placing it under duress.
Following the collapse of the Silicon Valley Bank (SVB), there has been a spike in USDC to USD/stablecoin conversion, forcing the Circle-issued token to de-peg.
As of writing on Mar. 11, the stablecoin traded at $0.96 to the USD.
Circle has been forced to meet redemption demands, yet an estimated 75% of their total reserve at approximately $40b is held in short-term Treasuries. Circle will have to sell their bonds for fiat and reimburse clients, impacting the bonds market.
Go to Source to See Full Article
Author: Dalmas NgetichDid you like this?
Tip BTC Newswire with CryptocurrencyDonate Bitcoin to BTC Newswire
Scan the QR code or copy the address below into your wallet to send some bitcoin:Donate Bitcoin Cash to BTC Newswire
Scan the QR code or copy the address below into your wallet to send bitcoin:Donate Ethereum to BTC Newswire
Scan the QR code or copy the address below into your wallet to send some Ether:Donate Litecoin to BTC Newswire
Scan the QR code or copy the address below into your wallet to send some Litecoin:Donate Monero to BTC Newswire
Scan the QR code or copy the address below into your wallet to send some Monero:Donate ZCash to BTC Newswire
Scan the QR code or copy the address below into your wallet to send some ZCash:
