Alchemy in the Blockchain Era

The beauty of stablecoin

Stablecoins represent a modern form of financial alchemy – creating value out of thin air in the technological age. The notion of tethering them to assets like U.S. Treasuries or gold to form a new liquidity loop is hardly innovative; we foresaw this most probable outcome over three years ago. Regardless of what form of "dollar" is used to purchase Treasuries, domestic U.S. holdings will continue to grow. Unlike Japan, the Fed may no longer need to performe quantitative easing to absorb this debt in the future. Instead, the interest rate mechanism of the "dollar" itself will inevitably become more reliant on market supply and demand rather than the decisions of the FOMC. The Fed’s control on interest rates and liquidity have undergone some interesting transformation since the Biden admin, with the Treasury taking a more active role in the mix.