Since May, stablecoin issuers such as Circle, Tether, and others had short-term US debt of more over $80 billion, according to a research by financial platform JPMorgan. When compared to Warren Buffett’s Berkshire Hathaway, this number is far greater.
In May, stablecoin companies owed a total of $80 billion.
Stablecoin issuers like Circle and Tether own a sizable chunk of the US Treasury market. In addition, they’ve done better than many traditional financial firms.
JPMorgan, an investment firm, produced a study last week highlighting the companies’ respective debt loads. In May of 2022, the aggregate short-term US debt of all stablecoin issuers was above $80 billion.
Over 2% of the US Treasury bill market was held by Circle, Tether, and other stablecoin issuers. They were also the largest holders of T-bills among major investment firms, surpassing even Berkshire Hathaway.
When comparing the percentage of T-bills held by various entities, stablecoin issuers performed better than offshore MMFs (money market funds), prime MMFs, principal dealers, and international organizations.
The Makeup Of Investors In US Treasury Bills Reference: JPMorgan
T-bills are a type of financial instrument commonly used as a cash equivalent by companies. Companies buy them because they are low-risk investments.
This year, both Circle and Tether announced they will reduce their reliance on commercial papers. They have been using Tether to purchase US Treasury bills in an effort to deplete the currency’s commercial paper reserves.
Currency exchanges like Tether and the USDC keep buying Treasury bills.
After TerraUSD’s demise, uncertainty surrounded stablecoins, prompting Tether and Circle to make a move to buy T-bills. Terra’s stablecoin lost its value-against-the-dollar peg in May and fell below $1.
The USD backing of algorithmic stablecoins is typically ensured by means of smart contracts and algorithms. Cash and other cash equivalents are held as reserves for stablecoins like the USDC and USDT.
To prevent the stablecoin from depegging, these reserve assets are used to keep its value constant. According to data provided by CoinGecko as of this writing, USDT has a market cap of $67.6 billion, while USDC has a market cap of $52.4 billion.
There has been a lot of press on how the stablecoin USDC’s market cap has exploded in 2022. But since May, Tether’s market share has been steadily declining.
As reported by JPMorgan, USDT, Tether’s stablecoin, is losing popularity among investors. Reason for this is the recent happenings in the crypto community, such as Terra’s demise.
The investment bank also mentioned that USDC’s openness is a key factor in the currency’s rising popularity. The reserve assets of the stablecoin were also characterized, including their quality.