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Stablecoin adoption continues to accelerate, and according to Messari’s “State of Stablecoins” report, stablecoin capital flows are directly impacting the $28 trillion U.S. Treasury market.
According to the report, which cites data and research from the Bank of International Settlements, “a multi-billion dollar weekly inflow into stablecoins is linked with a ~2.5 bp [basis point] drop in 3-month Treasury bill yields after 10 days, and upwards of ~5 bps reduction after 20 days.”
It goes on to say that this knock-on effect from stablecoin popularity is “comparable to that of small-scale quantitative easing on long-term yields.” The correlation works both ways, with large outflows reportedly having an even greater impact on Treasury yields, raising yields by 6 to 8 bps over a ten-day period.
Stablecoin growth has been a key theme of this market cycle, with the sector’s total market capitalization increasing by 101% to $262 billion from $130 billion at the beginning of 2024. This represents an increase of more than 800% since the beginning of 2021.
Investor demand for exposure to stablecoin companies was showcased by the success of the Circle IPO earlier this year. Circle’s CRCL stock went public at between $27-$31 per share, and increased tenfold in a matter of weeks, reaching a high of $299 on June 24. CRCL currently trades at $198 per share, a 538% increase from the high end of its IPO price range.
Additionally, the new stablecoin-focused Bitcoin sidechain, Plasma, raised $1 billion in capital nearly instantly during its ICO. The Plasma ICO is ongoing, and users have earned allocations to the ICO by staking USDT in Plasma’s vaults, which will serve as the chain’s initial total value locked (TVL).
Tokenized Treasuries and Yield-Bearing Stablecoins
The real-world asset (RWA) sector is accelerating even faster than traditional stablecoins, with a total on-chain RWA market capitalization of $24.8 billion, up 181% from $8.6 billion at the beginning of 2024.
Tokenized U.S. Treasuries are one of the RWA market’s largest subsectors, commanding a $6.77 billion market capitalization, or 27% of the total RWA space.
The onchain Treasury trend has been fueled by demand for yield-bearing stablecoins, where holders accrue yield from the Treasury bills that serve as the stablecoins’ backing. The choice to deploy stablecoin reserves in Treasury bills is one of the main drivers of the correlation between stablecoin flows and Treasury bill yields.
Stellar Network, which launched the first onchain money market fund in the form of Franklin Templeton's FOBXX fund in 2021, is one ecosystem that is leaning into yield-bearing stablecoin usage on its network. According to the report, the yield-bearing stablecoin market capitalization on Stellar has increased by roughly 33% since the beginning of 2024, reaching almost $450 million.
Messari says that issuers such as Franklin Templeton stand to save substantially on their costs due to tokenization and that the firm “is able to cut its record-keeping costs for every 50,000 transactions from $50,000 to $120.”
Messari Portals* show that RWAs are becoming a major scalability point for Stellar. Over the last three months, total RWA transactions on Stellar are up 41%, the chain’s RWA market cap is up almost 8%, and RWA transfer volume on Stellar is up 40%.
* Messari Portals are a free-to-use community resource that combines quantitative data with qualitative context, giving crypto communities transparent, convenient access to information that helps them make better decisions. Visithttps://messari.io/portals to learn more.