Fed Rate Cut Expected To Impact Stablecoin Revenue

According to PANews, the Federal Reserve's recent decision to cut interest rates for the first time since March 2020 is anticipated to affect the revenue streams of five major centralized stablecoins. A report by CCData, released on September 27, indicates that these stablecoins collectively hold nearly $125 billion in U.S. Treasury bonds. Each 50 basis point (bps) rate cut could result in an estimated $625 million loss in interest income. The report highlights that U.S. Treasury bonds constitute 80.2% of the reserves held by these primary stablecoins. Data from the Chicago Mercantile Exchange's FedWatch tool suggests that the market expects a total rate cut of 75 bps by the end of 2024, including a 50 bps cut in November and an additional 25 bps cut in December. If these predictions materialize, stablecoins could face an additional $937.5 million in revenue losses, bringing the potential total loss due to the Fed's easing policy to $1.5625 billion. Among the affected stablecoins, Tether's USDT holds the largest share of U.S. Treasury-backed reserves, amounting to $93.2 billion, including Treasury bonds and repurchase agreements. Circle's USD Coin (USDC) follows with $28.7 billion in U.S. Treasury holdings through the Circle Reserve Fund. Other stablecoins, such as First Digital USD (FDUSD), PayPal USD (PYUSD), and TrueUSD (TUSD), hold smaller Treasury positions of $1.83 billion, $634 million, and $502 million, respectively. Despite these potential financial setbacks, the stablecoin market continues to demonstrate resilience. CCData reports that in September, the total market capitalization of stablecoins increased by 1.50%, reaching $172 billion, marking twelve consecutive months of growth.