@fehrsam
Will stablecoins become the world's largest owners of US Treasuries?
đź’µ
It seems possible that crypto stablecoins become the largest holders of US Treasuries in the world. Putting up $1000 for the one layer deeper analysis to support or debunk that thesis.
@bountybot
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@jeremybatchelder
Here’s my submission - https://docs.google.com/spreadsheets/d/15sxp6czHBSuJzfP3jcgp89pMo2VmzSr3ypXXkjGCxs8/edit?usp=sharing
I think it’s important to clarify in the original post that 16th largest treasury holder should be in comparison to sovereign entities and not the federal reserve system, mutual funds, etc
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@jeremybatchelder
1) Stablecoin issuers are the 22nd, not the 16th, largest holder of treasury securities among sovereign entities. Issuers only keep between 27% and 80% of their collateral in treasury securities — a percentage that increases when repo agreements are factored in. The doc provides details on both figures.
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@jeremybatchelder
2) Should the stablecoin market float increase tenfold, and assuming each country continues its 4-year compound annual growth rate (CAGR) for treasury security holdings, stablecoin issuers could ascend to the 7th position among the largest holders.
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@jeremybatchelder
3) The above number is a "best-case" scenario, with crypto-backed stablecoins comprising 0% of the supply (considered improbable). However, with a conservative estimate of a 25% crypto-backed supply, as forecasted by @nic for the next two years, issuers would fall to 8th place.
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@jeremybatchelder
Assumptions to highlight:
- The collateral distribution for stablecoin issuers remains constant over the next 10 years, excluding repo agreements, though the document provides data with and without repos as part of treasury holdings.
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@jeremybatchelder
- Sovereign entities' treasury security holdings continue at their four-year CAGR, accounting for the surge in issuances during COVID by considering data from 2019-2023. However, numerous other treasury security holders besides foreign countries may affect this trend, not fully captured by foreign ownership rates alone
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