The Future of Crypto Dollars
Credit to Nic Carter
In this article the Clip teams bring you an analysis of Nic Carter’s recent Slide Deck and his Bankless appearance where he discussed his take on the future of stablecoins or as he calls them “crypto dollars”.
We also cover some ways Clip.Finance can solve multi-billion dollar problems for crypto dollar markets. A central aspect of Nic’s outlook on crypto dollars is the intriguing parallels he draws between crypto dollars and the historical evolution of the eurodollar (dollars not in the US). His perspective is that the adoption of stablecoins will follow a trajectory similar to that of the eurodollar, a groundbreaking observation. He believes that 2023 for stables is ’67 for eurodollars and the value locked reflects that fact. This would be a good time to note that the eurodollar MC now is over $10T. Here are some of his predictions:
Crypto dollars play an important role in enabling regions outside the United States to seamlessly transact in US dollars. They might represent a small portion of on-chain value, but their contribution to transaction volume is very significant.
A fascinating statistic: stablecoins have reached volume parity with Visa, one of the world’s largest payment networks. Their continued growth is evident and inevitable. However, there’s a caveat — should the US maintain a hostile stance towards cryptocurrencies and stablecoins, we will continue to see outflows of crypto dollars from the US.
Nic thinks that stablecoins serving as a bridge to Traditional Finance is the most convincing argument for the inherent value of the blockchain space. Interestingly, Nic relates that there are already enough promising stablecoin-related deals from a venture capital perspective, to keep him busy for a year at Castle Island VC.
To put it simply crypto dollars enable final settlement, and they make digital, instant, cross-border, interoperable and composable payments possible. Something to consider is that no one has any idea how much fiat is out there, but ask how much $USDC and anyone could tell you down to the cent.
The value of stablecoins continues to grow, even in the face of fluctuating values across the broader cryptocurrency landscape. This begs the question: what truly constitutes value in the evolving world of digital assets?
It’s worth noting that some argue that only the state should be the authority when it comes to facilitating payments. This debate centres on the question of financial sovereignty and control. If the US gov thinks that banks should handle all transactions the regulatory environment will be too hostile for far-reach crypto dollar adoption in the US.
After a recent rule from the FED requiring all banks to get a letter from them if they intend to interact with crypto dollars, there have been large flows to offshore.
Crypto dollar growth is focused across Latin America, Eastern Europe, Africa, and Southeast Asia, which points to the borderless aspect of these currencies. The inevitable spread of crypto dollars into regions with underdeveloped financial systems is expected, as local governments might struggle to exert control.
A large point that we would like to highlight is that recently when interest rates were moved up by the FED there was large outflows from $USDC, around $15B, presumably because US firms did not want to get hit with the opportunity cost of 535 basis points. This was made possible by $USDC’s simple redemption framework.
http://Clip.Finance provides the on-chain infrastructure to negate the need for these multi-billion dollar outflows with our +7% on stablecoins through our diversified yield strategies. You can find this point in the discussion here: https://www.youtube.com/watch?v=iecFhe2THeo exactly on the hour mark.
This infrastructure removes the need for capital to exit $USDC because we remedy the opportunity cost of keeping those assets on-chain.
Additionally, Clip Finance offers the technology so that people who go bankless and holding their own money can earn diversified yield off their capital, avoiding the opportunity cost of simply holding $USDC compared to a run of the mill bank account.
Crypto-backed and interest bearing crypto dollars are another solution to this problem. They are also a potential solution to the perceived value crisis of the US dollar. Exciting times lie ahead!
