|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency News Articles
Tokenized Treasury Issuers See Interest Rate Cuts as a Boon, Not a Bane
Aug 24, 2024 at 01:06 pm
In the decade before the Fed began raising interest rates to combat inflation, there wasn't much difference between holding cash and holding treasuries
Federal Reserve Chair Jerome Powell essentially confirmed on Friday what traders already knew: Interest rate cuts are coming.
Still, don’t expect businesses that offer or rely on tokenised treasuries, which benefit from high interest rates, to lose any sleep, several market players told DL News earlier this month.
That lack of concern prevails now that Powell has all but confirmed interest rate cuts, according to issuers of tokenised treasuries.
In the decade before the Fed began raising interest rates to combat inflation, there wasn’t much difference between holding cash and holding treasuries, Jim Hiltner, head of business development at Superstate, told DL News.
“Now, obviously there is, and I believe that that will continue to be the case,” he said.
Issuers of tokenised treasuries include multitrillion-dollar asset managers BlackRock and Franklin Templeton, as well as firms with a background in crypto like Superstate.
With $93 million in assets under management, Superstate, which launched in January, is the sixth-largest issuer of tokenised securities.
“You have an incentive for the Federal Reserve to continue to have a tight-ish environment with high-ish rates, but they’re not going to bring them back to zero in the next six months. It’s just not going to happen unless the economy falls off a cliff.”
Mission accomplished?
Interest rates hovered just above zero for several years after the Great Recession. Although they began to creep up during the presidency of Donald Trump, they shot back down to near-zero when the pandemic hit, with policymakers pulling out all the stops in an attempt to prevent economic calamity.
The subsequent recovery was much faster than they expected. Coupled with lingering, post-pandemic supply chain issues, prices began to skyrocket. The Federal Reserve, tasked with balancing stable prices and low unemployment, raised interest rates to their highest point since mid-2007.
The effective federal funds rate — the median interest rate for overnight loans between US banks — hit 5.33% a year ago and has stayed there since.
The high rates hobbled DeFi projects, whose relatively high risk was no longer worth their yield. But it was a boon to projects that invested in treasuries such as MakerDAO.
Yields from those treasuries has hovered above 5% — a lucrative and safe way to earn from assets that would otherwise be sitting dormant.
In just a few months, money invested in projects offering tokenised treasuries has soared from about $750 million in March to more than $1.9 billion today, according to data from RWA.xyz, an analytics firm tracking the tokenisation of real-world assets such as treasuries, stocks, and bonds.
But the Fed’s strategy has worked — inflation is now hovering just above the Fed’s 2% target. Meanwhile, a cooling labour market suggests a recession could be on the way, forcing the central bank to revisit its strategy.
“The upside risks to inflation have diminished. And the downside risks to employment have increased,” Powell said at the Fed’s annual gathering in Wyoming on Friday.
“The time has come for policy to adjust.”
‘Degen mode’
Martin Carrica, co-founder of Mountain Protocol, a stablecoin issuer that used tokenised treasuries as collateral — and passed that yield to stablecoin holders — isn’t too worried about what the lower rates will mean for his business.
“Clearly, 5% is better than 2%,” he told DL News, referring to the yield offered by Goldman Sachs’ savings account when it grew to $100 billion in user deposits. (Goldman’s Marcus now offers an interest rate above 4%.)
“To me the critical thing is, how much money can be made with ‘funny money’ (e.g. token incentives) [versus] how much yield-bearing assets can contribute,” Carrica said.
“If you can lend USDC and get 6% APY kicker on token XYZ, why would you go with [Mountain’s] USDM?”
While high-risk, high-reward DeFi yields will become more attractive as interest rates come down, Hiltner said that nonetheless he isn’t afraid of competition from the unregulated badlands of the crypto economy.
“Maybe you’re a retail person, or you’re some degen that doesn’t want to onboard to a regulated security, you can go and get 4.91%” on USDC by lending it on Aave, he said.
“That’s suitable for a certain audience. It’s not suitable for everybody. You’ve got big institutional hedge funds that have hundreds of millions of dollars that are like, ‘Yeah, we love that USDC rates are 8%, but I don’t have any interest in doing that.’”
Moreover, as rates go lower and people go into “de
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
-
- Bhutan Revealed as a Major Bitcoin Holder
- Sep 22, 2024 at 02:55 pm
- Crypto intelligence firm Arkham highlighted the Kingdom of Bhutan's bitcoin holdings on social media platform X this week.
-
- FLOCKERZ: A Revolutionary Meme Coin Project Changing the Meaning of Community in DeFi
- Sep 22, 2024 at 02:55 pm
- A brand-new meme coin initiative called FLOCKERZ is changing what it means to be a member of a decentralized community. Even though many crypto initiatives make the claim to be community-driven, FLOCKERZ goes one step further.
-
- Zilliqa (ZIL) Price Prediction: Will ZIL Reach $0.02 by 2024?
- Sep 22, 2024 at 02:55 pm
- Zilliqa (ZIL) stands out as a pioneering project that introduced sharding technology to the blockchain. Currently priced at approximately $0.015
-
- Larry Fink of BlackRock Now Believes Bitcoin Is a 'Legitimate Financial Instrument'
- Sep 22, 2024 at 02:45 pm
- The latest statement by Larry Fink hinted that he is eagerly waiting for big pumps in the trade price of Bitcoin (BTC).
-
- n earn up to 20% APY on their Bitcoin and Ethereum holdings. This program is designed to encourage new users to try out the staking and earning features of the platform.output title: Binance vs OKX: A Detailed Comparison of Two Crypto Exchange Giants
- Sep 22, 2024 at 02:25 pm
- ption: Binance and OKX are two of the biggest names in the cryptocurrency world, both offering a wide range of services and features to facilitate every type of trader. In 2024, these platforms continue to not only dominate a major portion of the crypto exchange space, but they are actively attracting new traders.
-
- Trump Is Now Selling Commemorative Coins for $100 as He Continues to Ask Supporters for Cash
- Sep 22, 2024 at 02:20 pm
- The coins display Trump’s face and an image of the White House with the words “In God We Trust.”
-
- Florida Police Department Launches 'Caught Doing the Right Thing' Coin Program to Reward Local Kids
- Sep 22, 2024 at 02:20 pm
- The Sebastian Police Department (SPD) on the state's Atlantic coast in Indian River County launched a new campaign this week with its Caught Doing the Right Thing coin program for kids doing good deeds in the city.
-
- Meet Qubetics: A Promising Newcomer Shaking Up the Cryptocurrency Market
- Sep 22, 2024 at 02:20 pm
- As October 2024 approaches, many investors closely monitor the ever-changing cryptocurrency market, where innovation and growth happen at lightning speed.
-
- Rare £1 coins: The 12 most valuable round pound coins in circulation and how much they are worth
- Sep 22, 2024 at 02:15 pm
- It's time to rummage through your piggy bank and check under your sofa cushions - you might be sitting on a small fortune in the form of rare £1 coins.