Lukas Ruppert on Warpcast

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Stablecoins are set to become the world's largest owner of US Treasuries by 2028! Over the past two weeks I wrote 40+ pages on the topic and calculated scenarios. Here is the tl;dr. A Megathread! cc @fehrsam @linda

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The methodology that underpins this thesis is a three-tiered approach that encompasses: - Assessment of current stablecoin holdings in US Treasuries. - Development of growth scenarios for the stablecoin ecosystem. - The status quo and forecast of the world's largest US Treasury holders.

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Here is the link to the full analysis, growth factors, and implications. Let’s dive into it! https://drive.google.com/drive/folders/1UFYVzkU1UaF1pwBxS23WcDjldT0OILOs?usp=drive_link

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i) US Treasury Holdings: As of 01/31/2024, a minimum of $82.65b Stablecoin Funds are held in US Treasuries. To determine this, I did a deep dive into the transparency reports of all major stablecoin issuers.

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Top 10 fiat-backed Stablecoin Holdings in detail:

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Top 6 crypto-backed Stablecoin Holdings in detail:

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Top 3 algo-backed Stablecoin Holdings in detail:

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ii) Stablecoin Growth Scenarios For the growth of the Stablecoin ecosystem three distinct scenarios were being considered. They include i) The 10x Market Cap Scenario, ii) The Bernstein Scenario (2.8T Market Cap in 2029), and iii) The Scenario that the ecosystem will grow by the 3-year CAGR of Tether.

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All scenarios are subject to the assumption that the current state, with 61.13% of the total market cap held in US Treasuries, will be maintained. The Bernstein scenario is based on forecasts by Bernstein Research, a premier sell-side research and brokerage firm.

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iii) US Treasury Holders In December 2023, Stablecoins were the 21st largest holder of US Treasuries.

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The forecast for the largest US Treasuries holders is derived through bottom-up and top-down methodologies. The bottom-up approach examines historical CAGRs to project future holdings, while the top-down method leverages reports from the Congressional Budget Office (CBO). Look at the Excel sheet for the details.

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iv) Results Under the 10x Scenario, stablecoins' growth would lead it to become the 4th largest holder of US treasuries overtaking the current largest holders Japan and China.

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According to the forecast from Bernstein Research, stablecoins will become the world’s largest holder by 2028.

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The Tether Scenario – like the Bernstein one – predicts Stablecoins to become the world’s largest holder of US Treasuries. Due to the comparatively (!) more conservative CAGR of 44%, it forecasts stablecoins to reach the largest holder status in 2033.

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You can find the full report with many more details and the limitations of the analysis here: https://drive.google.com/file/d/187qWwp0FHsB17fkWJbRrFNhT3FjqNk81/view?usp=sharing

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Additionally, please check out the excel sheet with all the calculations, data, and charts – feel free to create further scenarios: https://docs.google.com/spreadsheets/d/1fryNZTw3Ho2dgHGU-N5XIf84E95rIhuL/edit?usp=sharing&ouid=115493322550938224520&rtpof=true&sd=true

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From the analysis, two questions arise: i) What are the growth factors? ii) What are the implications of the Stablecoin Bull case? I decided to dive into both!

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Part Deux: “To the Moon or Mars? Growth Factors for Stablecoin Finance.” https://drive.google.com/file/d/1g95DWv07kDpgiBMS_SujAErMygo79WIN/view?usp=sharing Part Trois: “How the Stablecoin Bull Case could change the world.” https://drive.google.com/file/d/1Xgj3U-BeojfnNZbdAHrQApnMs14Wtjew/view?usp=sharing

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Part deux dives into the dynamics of “The Stablecoin Flywheel”. We’ll explore why the US government could kill Stablecoins at any time through Fed Master accounts and reasons they should or shouldn’t do. We’ll analyze when we will get JP Morgan Coin and see that it actually already exists.

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We’ll look at Ethena’s USDe, cryptos' latest stablecoin moonshot, and discuss why it will remain on the moon and not take us to Mars. We’ll also dive into the key dynamic for investing in the ecosystem and Cicle’s upcoming IPO. And much more…

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Part Trois closes the topic by exploring implications. We’ll look into redefining global finance through financial inclusion of 1.13b people and global currency competition. We’ll explore how monetary innovation will move from the country to the company level.

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And we’ll investigate how crypto narratives are about to change. The Casino on Mars will evolve into a Foundational pillar of digital finance and the fat protocol thesis is about to die.

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We are likely on the cusp of witnessing the birthwave of the next unicorns in stablecoin finance - entities that will redefine wealth, transactions, and economic power. It has the potential to bring forward institutions who will be the Goldman Sachs, JP Morgan, and Blackstone of 2070.

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