This article is sourced from a piece written by Arthur Hayes (Quid Pro Stablecoin), and compiled by Dongqu. (Background: Ripple has applied for a 'U.S. banking license', CEO: Once approved, $RLUSD will become the new standard for stablecoins) (Background Supplement: Are the good days over for Visa and MasterCard? Stablecoins are taking away business...) (Any opinions expressed in this article are solely those of the author and should not be taken as investment decisions or interpreted as recommendations or advice for engaging in investment trading.) The benefits exchange of stablecoins Stock investors shout: 'Stablecoin, stablecoin, stablecoin, Circle, Circle, Circle.' Why are they so bullish? Because U.S. Treasury Secretary Big Bessent Cock (note: a direct translation of the vulgar term) said: The result is this chart: This is a comparison chart of the market capitalizations of Circle and Coinbase. Note that Circle must pay 50% of its net interest income to its master Coinbase. So, how could Circle possibly be nearly 45% of Coinbase's market capitalization? This is indeed thought-provoking... Another result is this frustrating chart (because I hold Bitcoin, not $CRCL): This chart shows the price of Circle divided by the price of Bitcoin, with 100 as a baseline when Circle went public. Since its IPO, Circle's performance has outperformed Bitcoin by nearly 472%. Cryptocurrency believers should ask themselves why BBC is so optimistic about stablecoins. Why does this (Genius Act) have bipartisan support? Is it because U.S. politicians genuinely care about financial freedom, or is there something more? Perhaps politicians do care about abstract financial freedom, but lofty ideals do not drive practical action. There must be more real political reasons behind the sudden shift in attitude towards stablecoins. Remember in 2019 when Facebook attempted to integrate the stablecoin Libra into its social media empire, but it was stillborn due to opposition from politicians and the U.S. Federal Reserve (Fed). Let's review the main issues that BBC must address to understand why BBC is so fascinated with stablecoins. The main issues faced by U.S. Treasury Secretary Scott 'Big Bessent Cock' Bessent are similar to those faced by his predecessor Janet 'Bad Gurl' Yellen. Their superiors like to spend money without increasing taxes; that is to say, this is how the U.S. President and politicians in the House and Senate operate. Therefore, the duty of the Secretary of the Treasury is to fund the government by borrowing at affordable interest rates. The market quickly made it clear that they were unwilling to buy long-term government bonds from advanced economies burdened with debt at high prices/low yields. What BBC and Bad Gurl Yellen have witnessed in recent years is precisely this apocalyptic storm... Hips are shaking non-stop: These are the yields of 30-year bonds from the UK (white), Japan (gold), the U.S. (green), Germany (magenta), and France (red). If rising yields were not bad enough, the real value of these bonds has also been burned. Real value = bond price / gold price TLT US is an ETF that tracks treasury bonds with a maturity of over 20 years. TLT US divided by the gold price, indexed to 100. In the past five years, the real value of long-term treasury bonds has plummeted by 71%. If past performance was not bad enough, Yellen and now Bessent face other constraints. The Treasury bond sales team must devise an issuance schedule to achieve the following goals: Fund an annual federal deficit of about $2 trillion and a debt of $3.1 trillion maturing in 2025. The first two charts show that the weighted average interest rate on treasury debt is below the yields across the entire treasury yield curve. ● The financial system issues credit secured by nominally risk-free treasury debt. Therefore, interest must be paid; otherwise, the government will nominally default, which will destroy the entire dirty fiat financial system. Since the entire treasury yield curve is above the current weighted average interest rate of the debt, as maturing debt will be financed at higher rates, interest expenses will continue to rise. ● Given that the U.S. is at war in Ukraine and the Middle East, the defense budget will not be cut. ● As the baby boomer generation enters their golden years of obtaining healthcare from major pharmaceutical companies (paid for by the U.S. government), healthcare spending will increase in the early 2030s. Sell bonds in a way that prevents the benchmark 10-year yield from exceeding 5%. ● When the 10-year yield approaches 5%, bond market volatility as measured by the MOVE index will surge, and a financial crisis is not far behind. Sell bonds in a manner that stimulates broad financial markets. This chart from the U.S. Congressional Budget Office only covers data up to 2021, but it clearly shows that since the 2008 global financial crisis, as the U.S. stock market has continued to rise, capital gains tax revenue has also surged. ● The U.S. government needs capital gains tax revenue generated from the stock market's annual growth to avoid a truly staggering fiscal deficit. ● The existence of the U.S. government is to serve wealthy property owners. In the good old days, when women were in the kitchen, blacks were in the fields, and Indians were in the back, only white male property owners were allowed to vote. In modern America, despite the universal suffrage, power still comes from controlling the wealth of publicly traded companies, resulting in government policies that enrich and consolidate families that own over 90% of stock market wealth, roughly 10%. One of the most obvious examples of government favoritism towards property owners was during the 2008 global financial crisis (GFC) when the Federal Reserve printed money to save banks and the broader financial system, but banks were still allowed to seize people's homes and businesses. Rich man's socialism, poor man's capitalism! With such a record, it is no wonder that New York City mayoral candidate Mandani is so popular; the poor also want a little socialism. When the Federal Reserve implements quantitative easing (QE), the job of the Secretary of the Treasury becomes easy. The Federal Reserve prints money and buys bonds, allowing the U.S. government to borrow heavily and pushing up the stock market. But now, the Federal Reserve must at least superficially show that it is combating inflation, and this lofty institution can neither cut interest rates nor engage in quantitative easing. The Treasury must independently bear the heavy burden. As of September 2022, due to the historically unprecedented size of the U.S. federal deficit during peacetime, combined with the Federal Reserve's hawkish stance, the market decided to sell bonds. The yield on 10-year Treasuries nearly doubled within two months, and the stock market fell nearly 20% from its summer peak, then 'Bad Gurl' Yellen put on her red-bottom shoes and got to work. In a paper written by Hudson Bay Capital, this was referred to as 'Radical Treasury Issuance Strategy' (ATI), where Yellen began issuing more treasury bonds than interest-bearing bonds. Over the next two years, $2.5 trillion was injected into the financial market due to the decline in the Federal Reserve's reverse repurchase agreement (RRP) balance. If the goal is to achieve the three conditions I listed above, then Yellen's ATI policy successfully achieved that...

#BTC #ETF