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2 weeks ago I tried an experiment in bounty based research. Could a $1k @bountycaster bounty successfully solve a research question?

TL;DR: Bounty-based research worked pretty well!

The question: Will stablecoins become the largest holders of US debt?

First, the bounty winners. I originally posted for a single $1k winner but after seeing the submissions decided to give 3 $1k winner bounties and 1 $250 honorable mention.

The winners:
1) @jeremybatchelder
https://docs.google.com/spreadsheets/d/15sxp6czHBSuJzfP3jcgp89pMo2VmzSr3ypXXkjGCxs8/edit#gid=809946059

2) @lxn
https://drive.google.com/drive/folders/1UFYVzkU1UaF1pwBxS23WcDjldT0OILOs

3) @michaellwy
https://docs.google.com/document/d/1xdnsVk-Q0h2Vrc_Ggaisqozr9vB1yMB8/edit

@MaelstromFund | Prev @PretzelDAO, @areta_io, Crypto Research @Cambridge_Uni

Contributor at Blockcrunch. Writing Ceteris Paribus - musings at the intersection of crypto, econ, and policy.

https://michaellwy.substack.com/

Intriguing question posed in this thread:

Can stablecoins be a critical sink for U.S. treasuries?

https://warpcast.com/fehrsam/0xd1649c39

my estimate below 👇

Honorable mention:
@paulx 
https://warpcast.com/paulx/0x0645138f

It turns out $1k brings quality answers to make it worthwhile, especially for questions that are open ended logically and in supporting data.

It did require work: reading submissions and stitching them together. But I'd try it again for an open-ended question that ChatGPT (at least currently) would struggle with.

Now on to the question: Will crypto stablecoins become the largest holders of US debt?

The analysis revealed:
- Stablecoins are on track to be in the 10 largest holders of US debt within 10 years
- A simple extrapolation of the last 3 years would make stablecoins the largest holders of US debt in the world

Zooming out further, on their current trajectory, this analysis of stablecoins solidified 2 things for me:
1) Stablecoins will be one of the largest sinks for US debt over the next 10 years
2) Stablecoins will become "systemically important" to the US and global financial systems

For detailed scenario analysis, check out this sheet from @jeremybatchelder https://docs.google.com/spreadsheets/d/15sxp6czHBSuJzfP3jcgp89pMo2VmzSr3ypXXkjGCxs8/edit#gid=2110422470
or Part 1 Section 3 of this analysis from @lxn:

For detailed scenario analysis, check out this sheet from @jeremybatchelder https://docs.google.com/spreadsheets/d/15sxp6czHBSuJzfP3jcgp89pMo2VmzSr3ypXXkjGCxs8/edit#gid=2110422470
or Part 1 Section 3 of this analysis from @lxn: https://drive.google.com/drive/folders/1UFYVzkU1UaF1pwBxS23WcDjldT0OILOs

A few other interesting learnings:
- Money market funds are up there with the largest sovereigns as holders of US debt (h/t @niccarter who has done amazing work on stablecoins).

- Fidelity is the largest MMF holding US Treasuries at $1.3T and growing, followed by JPM ($700b) and Vanguard ($600b). The largest sovereign holders are China ($1.1T) and Japan ($1T), both shrinking.

A good full breakout of US debt holders can be seen here: https://www.pgpf.org/blog/2023/05/the-federal-government-has-borrowed-trillions-but-who-owns-all-that-debt

- I hadn't realized (or willfully forgot) how large the Federal Reserve's holdings of US debt is. They are the largest holder of US debt, roughly $6 trillion of the $31 trillion, almost all accumulated in the last 15 years.

To caveat the findings, they are very sensitive to a few key variables:
- The growth of stablecoins
- Changes in foreign entity holdings (Japan and China are cutting rn)
- How buckets of holders are defined
- Potential diversification of stablecoin holdings into other assets

TL;DR: Stablecoins are already a big deal and are on track to be one of the most important parts of the global financial system.

Thanks to all the submitters for the mental cycles and hard work!