Stablecoins: Not so stable, are they? We’ve been sold a bill of goods, good Americans, haven’t we? They are the important wall that stands between the crypto-verse and finance. In an unpredictable economic climate, they offer the steadiness on which innovation can thrive. What if I told you they’re really speeding up the very crisis they’re allegedly helping you avoid?
Stablecoins Debasing the Dollar Faster?
That's right. Think of it this way: Max Keiser calls Bitcoin a Credit Default Swap (CDS) on the "$400 trillion global fiat money scheme." If that scheme is our existing financial system, and it's showing cracks – look at the rising national debt, the frantic money printing – stablecoins aren't patching those cracks. They're widening them.
Here's the unexpected connection: remember fractional reserve banking? This is because banks don’t lend out money, they create it when they do. Stablecoins are like that but times a hundred. Each time a new stablecoin is created, it’s backed by…what? Often, U.S. Treasuries. Results of the day Stablecoin issuers are buying up U.S. debt. Such action would lower the interest rate artificially, allowing the government to continue its debt-funded spending binge. This, for all practical purposes, doubles the M2 money supply. It's like printing money twice!
This isn’t stability. It’s a precarious balancing act. This new money creation increases the money supply which dilutes the purchasing power of each dollar already in circulation. Your savings are worth less. Inflation persists. And the cycle continues.
The anxiety here is real. Yet our purchasing power continues to erode at rocket speed. This, in my opinion, is where stablecoins, that so-called “safe haven,” are exacerbating the problem.
Issuers Accumulating BTC: A Signal?
Now, here's where things get really interesting. But now we’re hearing reports that stablecoin issuers themselves are quietly building Bitcoin on the down-low. Why would they do that? But if stablecoins are the last word in hedging, then why even hedge the hedge.
The solution, I’d argue, is this burgeoning realization that the current fiscal paradigm is untenable. These issuers, with their inside view of the crypto and traditional markets, are recognizing that Bitcoin offers a potential escape hatch. They're preparing for a future where the dollar's dominance is challenged, and decentralized, scarce assets like Bitcoin become increasingly valuable.
This connects neatly with the idea of social currency. By understanding this, you look smart. Instead, you are “in the know” about why our current financial system is broken.
Few understand macroeconomic risks better than billionaire investor Ray Dalio. We’re counting on you to invest at least 15% of your portfolio in Bitcoin or else gold. There’s plenty of evidence that the tide is turning and the smart money is making plans accordingly. Are you?
Regulators Asleep at the Wheel?
The political angle here is crucial. Regulators are thankful playing catch up, but are they really even prepared to grasp the nuances of decentralized finance? I'm skeptical.
As history reminds us at every turn, regulation always trails innovation. By the time regulators figure out what’s going wrong, it might be too late. Additionally, there is the persistent danger of regulatory capture, in which the regulated industry tries to and often successfully coopts the regulators for their own benefit.
Consider this: if stablecoins truly pose a systemic risk (and I believe they do), what's stopping a major stablecoin issuer from collapsing and taking down a chunk of the financial system with it? What if confidence in the dollar really breaks down? What if a major stablecoin issuer were to go rogue on us?
These are not hypothetical questions. It’s not fantasy apocalypse stuff, these are real possibilities that we need to come to terms with. Time will tell in the coming months how resilient these assets both new and old will be as the monetary rug is pulled out from underneath them.
The bottom line? Don't blindly trust the narrative. Dig deeper. Understand the risks. Just think about what Bitcoin could be. Despite its volatility, it is likely to give a more sustainable long-term hedge against the crypto-based silent revolution that stablecoins are unknowingly powering.
| Asset | Perceived Benefit | Potential Risk |
|---|---|---|
| Stablecoins | Stability, bridge to traditional finance | Dollar debasement, systemic risk, regulation |
| Bitcoin | Hedge against fiat currency, scarcity | Volatility, regulation |
| U.S. Treasuries | "Safe" investment | Inflation, declining demand |
The surprise link is that the solution is the very same as the problem. The "stable" coins are destabilizing the market. Market reactions show increased demand for Bitcoin as an inflation hedge. Simultaneously, we are seeing unprecedented activity and growth in non-dollar, alternative assets like Ethereum and NFTs. During this frothy Ethereum rally, Ethereum’s implied value reached $60,000 worth of ETH—highlighting the power of this massive liquidity to increase alternative cryptocurrency’s value exponentially.
