The Federal Reserve's recent decision to cut interest rates for the first time since March 2020 is poised to affect the revenue streams of five major centralized stablecoins. A report by CCData, released on September 27, reveals that these stablecoins collectively hold nearly $125 billion in U.S. Treasury bonds.
Each 50 basis point (bps) rate cut may result in a significant $625 million loss in interest income. This leads to a concerning outlook, as U.S. Treasury bonds constitute 80.2% of the reserves held by these primary stablecoins. Data from the Chicago Mercantile Exchange's FedWatch tool indicates that the market anticipates a cumulative rate cut of 75 bps by the end of 2024, which includes a 50 bps cut in November followed by an additional 25 bps cut in December.
Should these expectations be realized, stablecoins could incur an additional $937.5 million in revenue losses, elevating the total potential loss attributed to the Fed's easing policy to a staggering $1.5625 billion. Among the stablecoins adversely impacted, Tether's USDT holds the most substantial share of U.S.
Treasury-backed reserves, totaling $93.2 billion, which includes Treasury bonds and repurchase agreements. Following closely is Circle's USD Coin (USDC), possessing $28.7 billion in U.S. Treasury holdings through the Circle Reserve Fund. Other stablecoins, such as First Digital USD (FDUSD), PayPal USD (PYUSD), and TrueUSD (TUSD), maintain more modest Treasury positions of $1.83 billion, $634 million, and $502 million respectively. Despite these potential financial setbacks, the stablecoin market continues displaying remarkable resilience.
CCData indicates that in September, the total market capitalization of stablecoins rose by 1.50%, reaching $172 billion, marking a notable twelve consecutive months of growth. This durability in the face of fiscal challenges speaks volumes about the underlying strength and adaptability of the stablecoin ecosystem.
As the market navigates these changes, stakeholders should remain vigilant and informed about the evolving landscape and its implications for their investments and strategies in the realm of digital finance..