Arthur Hayes: $100 Trillion to Flow into Stablecoins, DeFi Set for Value Explosion

Original Article Title: Buffalo Bill

Original Article Author: Arthur Hayes, Founder of BitMEX

Original Article Translation: AIMan, Golden Finance

The United States Treasury Secretary Scott Bessent deserves a new nickname. I previously referred to him as BBC, which stands for Big Bessent Cock. Yes, his destructive "ding dong" is currently wreaking havoc on the global financial ecosystem, but this nickname does not fully capture his essence. I believe he needs a more appropriate name to describe the pain he is going to inflict on two very important parts of the fiat (fugazi) financial system: the Eurodollar banking system and foreign central banks.

Just like the serial killer in the movie "The Silence of the Lambs" (which is absolutely a classic worth a "Netflix and Chill" night for any young person who hasn't seen it), Scott "Buffalo Bill" Bessent is about to eradicate the Eurodollar banking system and take control of foreign non-dollar deposits. Just as slaves and a trained legion maintained the "Roman Peace" (Pax Romana), slavery and dollar hegemony uphold the "American Peace" (Pax Americana). The slavery aspect of the "American Peace" not only refers to historically bringing Africans to pick cotton; the modern whip is the "monthly payment," with generations of young people willingly shouldering crushing debt to obtain worthless certificates, hoping to work at Goldman Sachs, Sullivan & Cromwell, or McKinsey. This is a broader, more insidious, and ultimately more effective form of control. Unfortunately, now that the U.S. has AI, these debt cattle are about to be unemployed... Put on your blue-collar overalls, buddy.

I digress.

This article will discuss the control of the global reserve currency, the US dollar, under the "American Peace." Each U.S. Treasury Secretary has wielded the dollar stick to varying degrees of success. The most notable failure is allowing the emergence of the Eurodollar system.

The Eurodollar system emerged in the 1950s and 1960s, aiming to circumvent U.S. capital controls (such as Regulation Q), evade economic sanctions (the Soviets needed a place to park their dollars), and provide banking services for non-American trade flows during the global post-World War II recovery. The monetary authorities at the time could have recognized the necessity of supplying dollars to foreigners and allowed domestic currency center banks in the U.S. to control this business, but domestic political and economic considerations required a tough stance. As a result, the Eurodollar system developed to an unknown scale over the following decades, becoming an undeniable force. An estimated $10 to $13 trillion of Eurodollars flow through various non-American bank branches. The ebb and flow of this capital led to various financial crises in the post-World War II era, which always required money printing to resolve. The Federal Reserve Bank of Atlanta wrote a paper in August 2024 titled "Offshore Dollars and U.S. Policy" discussing this phenomenon.

For Benthall, there are two issues with the Eurodollar system. The first issue is that he has no idea how many Eurodollars exist and what these dollars are being funded for. The second, and most important, issue is that these Eurodollar deposits are not being used to purchase his junk sovereign debt. Does Benthall have a way to address these two issues? Keep in mind first, I’ll quickly talk about non-US retail holders' foreign currency holdings.

De-dollarization is real. It truly began in 2008 when the US currency overlords decided not to let banks and financial institutions collapse due to their bad bets but to rescue them by initiating unlimited quantitative easing (QE Infinity). A useful indicator of the reaction of global central banks holding trillions of US dollar-denominated assets is the percentage of gold in their reserves. The higher the percentage of gold in one's reserves, the less trust there is in the US government.

As seen in the chart above, after 2008, the percentage of gold in central bank reserves hit bottom and began a long-term uptrend.

This is the TLT US ETF, which tracks the trend of US Treasury bonds with a maturity of 20 years or longer divided by the price of gold. I set its index to 100 starting in 2009. Since 2009, relative to gold, bonds have depreciated by nearly 80%. The US government's monetary policy is to rescue its banking system while screwing over foreign and domestic debt holders. No wonder central banks of other countries started mimicking Scrooge McDuck by hoarding gold. President Trump intends to follow a similar strategy, but besides screwing over bondholders, he believes that by taxing foreign capital and trade flows through tariffs, he can make America great again.

Benthall indeed can't do much to persuade central bank reserve managers to buy more bonds. However, from a dollar's perspective, there is a large, underbanked population in the Global South that is most eager to have a dollar-denominated account with positive yield. As you know, compared to Bitcoin and gold, all fiat currencies are garbage. Nevertheless, if you are within a fiat system, the best fiat is the US dollar. Regulatory bodies in most countries force their populace to hold poor-quality currencies plagued by high inflation and restrict them from entering the dollar financial system. These people would buy Treasury bills (T-bills) at any yield Benthall provides just to escape their rotten government bond market. Does Benthall have a way to offer banking services to these people?

I first went to Argentina in 2018 and have been going regularly since then. This is a chart of ARSUSD indexed to 100 starting in September 2018. The Argentine peso has devalued against the dollar by 97% in seven years. Currently, when I go there to ski, all expenses for my service personnel are paid in USDT.

Bennett has discovered a new tool to solve his problem. It's called a stablecoin. A stablecoin pegged to the US dollar is now gaining support from the US Treasury Department. The Empire will back selected issuers as they siphon off Eurodollars and global Southern retail deposits. To understand why, I'll quickly outline the structure of an "acceptable" stablecoin pegged to the dollar. Then, I'll discuss the impact on the traditional financial (TradFi) banking system. Finally, and this is also why you degenerates are here, I'll explain why the global adoption of the US-backed stablecoin will drive the long-term usage growth of DeFi applications, especially Ethena, Ether.fi, and Hyperliquid.

As you know, Maelstrom (the author's institution) doesn't work for free. We hold positions. Lots and lots and lots of positions.

If you're not yet familiar with stablecoins, I'll tease a new stablecoin infrastructure project we're consulting on—Codex—I believe it will be the top-performing token from the upcoming token generation event (TGE) until the end of this cycle.

What Is an Acceptable Stablecoin?

A stablecoin pegged to the US dollar is akin to a narrow bank. The stablecoin issuer accepts dollars and invests them in risk-free debt instruments. The only debt instrument nominally risk-free in dollars is treasury debt. Specifically, since the issuer must be able to redeem for physical dollars on-demand, stablecoin issuers will only invest in short-term treasuries (T-bills). Short-term treasuries have a term of less than a year. Because they have close to no or no duration risk, their trading is like cash.

Let's look at the process.

To create one unit of stablecoin, I'll use Tether USD (ticker: USDT) as an example:

1. Authorized Participant (AP) wires dollars to Tether's bank account.

2. Tether mints 1 USDT for every $1 deposited.

3. To earn dollar returns, Tether buys treasuries.

If the AP wires $1,000,000, they receive 1,000,000 USDT.

Tether buys treasuries worth $1,000,000.

USDT does not pay interest.

However, Treasury Bonds basically pay the Federal Funds Rate, currently 4.25% to 4.50%.

Tether's Net Interest Margin (NIM) is 4.25% to 4.50%.

To attract deposits, Tether or affiliated financial institutions (such as cryptocurrency exchanges) will pay a portion of the NIM when depositors stake their USDT. Staking simply means locking up your USDT for a period of time.

Redeeming a unit of stablecoin:

1. AP sends USDT to Tether's crypto wallet

2. Tether sells Treasury Bonds equivalent to the USD amount of USDT.

3. Tether sends $1 to AP's bank account for every 1 USDT.

4. Tether burns the USDT, removing it from circulation.

Tether's business model is very straightforward. Receive dollars, issue digital tokens operating on a public blockchain, invest the dollars in Treasury Bonds, and earn the NIM. Bessonite will ensure that the Empire’s lawfully sanctioned issuer may only hold dollars at chartered American banks and/or hold Treasury Bonds. No fancy business there.

Impact on Eurodollars

Before stablecoins, when Eurodollar banking institutions were in trouble, the Federal Reserve and the US Treasury always stepped in to help. A well-functioning Eurodollar market is critical to the Empire's health. But now there's a new tool to absorb those flows. On a macro level, Bessonite must provide a reason for Eurodollar deposits to move on-chain.

For example, during the 2008 global financial crisis, the Fed secretly provided billions of dollars in loans to foreign banks that were short of dollars due to the subprime mortgage loan and associated derivative meltdown. As a result, Eurodollar depositors believed that the US government implicitly guaranteed their funds, even though technically they were outside the US-regulated financial system. Stating that in case of another financial crisis, non-US bank branches would not receive any help from the Fed or Treasury would redirect Eurodollar deposits back into the arms of stablecoin issuers. If you think that's a stretch, a strategist at Deutsche Bank wrote an article openly questioning whether the US would weaponize dollar swap lines to force Europeans to do what the Trump administration asks them to do. You better believe Trump's fondest desire is to emasculate the Eurodollar market by effectively cutting off their bank services. These institutions cut off his family's bank services after his first term; now it's payback time. Just deserts.

With no guarantee, Eurodollar depositors will act in their own best interest by moving funds into a USD-pegged stablecoin like USDT. Tether holds all of its assets as U.S. bank deposits and/or Treasury securities. By law, the U.S. government guarantees all deposits at its eight "too big to fail" (TBTF) banks; after the 2023 regional bank crisis, the Fed and Treasury effectively guaranteed all deposits at any U.S. bank or branch. The default risk on Treasuries is also nil because the U.S. government will never voluntarily go bankrupt, as it can always print money to pay back bondholders. Therefore, stablecoin deposits are risk-free in nominal U.S. dollars, while Eurodollar deposits now are not.

Soon, USD-pegged stablecoin issuers will see inflows of $10 to $13 trillion and subsequently buy Treasury securities. Stablecoin issuers will become a price-insensitive giant buyer of BIS paper!

Even as Fed Chair Powell continues to thwart Trump's currency agenda by refusing to "cut rates, end quantitative tightening (QT), and restart quantitative easing (QE)," BIS can issue Treasuries at rates below the federal funds rate. He can do this because for stablecoin issuers to be profitable, they must buy anything he sells at the provided yield. With a few steps, BIS gains control of the front end of the yield curve. The Fed's presence continues to make no sense. Perhaps a Benini-style statue of BIS in a "Perseus with the Head of Medusa" style will stand in some D.C. square under a title "BIS and the Head of the Jekyll Island Monster (i.e., the Fed)."

Impact on the Global South

American social media companies will serve as a Trojan horse, destroying foreign central bank control over their civilian currency supplies. In the Global South, the penetration rate of Western social media platforms (Facebook, Instagram, WhatsApp, and X) is comprehensive.

I spent half of my life in the Asia-Pacific region. Converting depositor's local currency into dollars or dollar equivalents (e.g., HKD) for capital to gain USD returns and U.S. stocks has been a significant part of the region's investment banking business.

Local currency authorities play a game of whack-a-mole with traditional financial institutions to shut down schemes allowing capital outflows. Governments need civilian capital and to some extent isolate non-politically connected rich people's capital so they can levy an inflation tax, prop up poorly performing national champion firms, and provide low-interest loans to heavy industry. Even if BIS wants to use U.S. mega-bank centers as a vanguard to bank the desperate, local regulators prohibit this. But there's another more effective way to get that capital.

What if WhatsApp rolled out an encrypted wallet to every user? Within the app, users could seamlessly send and receive approved stablecoins like USDT. With this WhatsApp stablecoin wallet, users could send money to any other wallet on various public blockchains.

Let's illustrate how WhatsApp could provide a digital dollar bank account for its global billion-strong Southern members through a fictional example.

Fernando is a Filipino running a click farm in rural Philippines. Essentially, he creates fake followers and false impressions for social media influencers. As all his clients are overseas, he found receiving payments both challenging and costly. WhatsApp became his primary mode of payment as it offered a wallet to send and receive USDT. His clients also had WhatsApp and were more than willing to stop using clunky banks. Both parties were happy with this arrangement, effectively bypassing the local Philippine banking system.

Over time, the Philippine central bank noticed a significant and growing outflow of bank funds. They realized that WhatsApp had spread dollar-pegged stablecoins throughout the economy. The central bank had essentially lost control over the money supply. However, they were powerless to act. The most effective way to stop Filipinos from using WhatsApp was to shut down the internet. Moreover, even pressuring local Facebook executives (if any) would be futile. Mark Zuckerberg reigns from his bunker in Hawaii. And he has already garnered the blessing of the Trump administration to roll out stablecoin features to Meta users globally. Any internet legislation unfavorable to American tech firms would lead to hefty tariffs under the Trump regime. Trump has threatened the EU to raise tariffs unless they abandon "discriminatory" internet laws.

Even if the Philippine government could remove WhatsApp from the Android and iOS app stores, motivated users could easily circumvent the ban by using VPNs. Of course, any form of friction would dampen the use of internet platforms, but social media is essentially an addictive drug. After over a decade of continuous dopamine hits, the masses will find any workaround to keep hijacking their brains.

Lastly, Vessent could wield his sanction weapon. Asian elites have stashed their money in offshore banking centers of dollars. They evidently don't want their wealth eroded by their currency policies' inflation. Do as I say, not as I do. Suppose Philippine President Bongbong Marcos threatened Meta. Vessent could immediately retaliate by sanctioning him and his cronies, thereby freezing their billions in offshore wealth unless they relent and allow stablecoins to proliferate domestically. His mother Imelda is well aware of how long the arm of U.S. law is, having beaten RICO charges alleging her and her late husband, former dictator Ferdinand Marcos, embezzled Philippine government funds to buy New York City real estate. I doubt Marcos would be eager for round two.

If my thesis is correct and stablecoins are part of the US hegemonic agenda to expand the use of the US dollar, then the empire will shield US tech giants from local regulators as they provide USD banking services to the masses, beyond the reach of those governments. Assuming I'm right, how large is the total potential market for stablecoin deposits from the Global South? The most advanced bloc of nations from the Global South is the BRICS countries. The question is, what's the best estimate for local currency bank deposits? I asked Perplexity, and the answer is $4 trillion. I know this figure may be controversial, but let's also include the Euro-poors who use the euro. I believe the euro is a dead garcon walking, as Germany-first and then France-first economic policies will fracture the currency union. With the advent of capital controls, by the end of the century, the only use case for the euro will be to pay the entry fee for Berlin's iconic electronic music club Berghain and the minimum spend at the Caribbean's Shellona Beach Club on St. Barts. When we add the $16.74 trillion of European bank deposits, the total approaches around $34 trillion up for grabs.

Go Big or Go Home

Besant has a choice: go big or become a Democrat. Does he want Team Red to win the crucial 2026 midterms and, most importantly, the 2028 presidential election? I believe he does, and if so, the only path to victory is to fund Trump so he can outbid the Mamdanis and AOCs in offering more freebies to the masses. Therefore, Besant needs to find a deep-pocketed buyer for government debt. Clearly, given his public support for the technology, he sees stablecoins as part of the solution. But he needs to go all in.

If Eurodollar and Global South/Euro-poor deposits don't flow into stablecoins, he'll have to Bismarck them with all the tools in his sparkling arsenal (sanctions, etc.). Either dollarize or face sanctions again.

$10 to $13 trillion in government debt buying power comes from the collapse of the Eurodollar system.

$21 trillion in government debt buying power comes from Global South and Euro-poor retail deposits.

Total = $34 trillion

Clearly, not all of this capital will flow into USD-backed stablecoins, but at least we have a huge Total Addressable Market (TAM).

The real question is, how will the increase in stablecoin deposits, reaching as high as $34 trillion, drive DeFi adoption to new heights? If there is credible evidence that DeFi usage will increase, then which shitcoins will see a massive surge?

Stablecoin Flow Into DeFi

The first concept that readers must grasp is staking. Let's imagine that a portion of that $34 trillion now exists in the form of stablecoins. For simplicity's sake, let's assume that Tether's USDT has received all the inflow. Facing fierce competition from other issuers like Circle and major TBTF banks, Tether must pass on some of its net interest margin to holders. It achieves this by partnering with some trading platforms, where USDT staked in wallets associated with the platform generates interest in the form of newly minted USDT units.

Let's look at a simple example.

Fernando from the Philippines has 1000 USDT. PDAX, a cryptocurrency exchange based in the Philippines, offers a 2% staking USDT yield. PDAX has created a staking smart contract on Ethereum. Fernando stakes his 1000 USDT by sending it to the smart contract address, and a few things happen:·

1. His 1000 USDT becomes 1000 psUSDT (PDAX Staked USDT; PDAX's liability). Initially, 1 USDT = 1 psUSDT, but every day the psUSDT gains value compared to USDT due to interest accrual. For example, using a 2% annual interest rate and the ACT/365 simple interest accrual method, psUSDT gains about 0.00005 daily. After a year, 1 psUSDT = 1.02 USDT.·

2. Fernando receives 1000 psUSDT in his exchange platform wallet.

Some powerful things have just happened. Fernando has locked his USDT in PDAX and received an interest-bearing asset in return. psUSDT can now serve as collateral in the DeFi ecosystem. This means he can use it to trade another cryptocurrency; he can borrow against it as collateral; he can use it to leverage trade derivatives on DEX, and so on.

What will happen when Fernando wants to redeem his psUSDT for USDT a year later?

1. Fernando goes to the PDAX platform to unstake by either sending 1000 psUSDT to his trading platform wallet and/or connecting a third-party DeFi wallet (such as Metamask) to the PDAX dApp.

2. The psUSDT is destroyed, and he receives 1020 USDT.

Where does the additional 20 USDT interest paid to Fernando come from? It originates from the collaboration between Tether and PDAX. Tether has a positive net interest margin, simply interest income earned from its government bond portfolio. Tether then uses these dollars to create additional USDT, sending a portion to PDAX to fulfill its contractual obligations.

Both USDT (base currency) and psUSDT (interest-bearing currency) have become acceptable collateral across the entire DeFi ecosystem. Therefore, a certain percentage of the total stablecoin flow will interact with the DeFi dApp. Total Value Locked (TVL) measures this interaction. Whenever a user interacts with a DeFi dApp, they must lock up their capital for a period of time, as represented by TVL. TVL sits at the top of the funnel for transaction volume or other revenue-generating activities. Therefore, TVL is a leading indicator of the future cash flow of a DeFi dApp.

Before we delve into how TVL impacts the future revenue of several projects, I'd like to explain the key assumptions in the financial model we are about to use.

Model Assumptions

I will soon propose three simple yet powerful financial models to estimate the target prices of Ethena (token: ENA), Ether.fi (token: ETHFI), and Hyperliquid (token: HYPE) by the end of 2028. I predict until the end of 2028 because that is when Trump is supposed to step down. My fundamental assumption is that the likelihood of Team Blue (referring to the Democratic Party) winning the presidency is slightly greater than Team Red (referring to the Republican Party). That's because Trump is unlikely to successfully correct the injustices caused to his base voters over half a century of accumulated monetary, economic, and foreign policies within four years. The rat poison on the cake is that no politician will ever fulfill all their campaign promises. Hence, the turnout rate of ordinary Republican voters will decrease.

The ordinary members of Team Red will be indifferent to any successor of Trump running for president, and there won't be a sufficient number of them turning out to vote to surpass those suffering from Trump Derangement Syndrome (TDS) who are childless cat ladies. TDS will haunt any member of Team Blue that ascends to the throne, leading them to adopt a cut-off-their-nose-to-spite-their-face monetary policy just to prove they are unlike Trump. However, ultimately, no politician can resist the temptation of printing money, and the stablecoin pegged to the dollar is one of the best price-insensitive buyers of short-term treasuries. They might not initially fully support stablecoins wholeheartedly, but the new emperors will find themselves exposed without these capital inflows and will eventually continue the policy I discussed earlier. This policy swing will burst the crypto bubble, leading to an epic bear market.

Finally, the numbers mentioned in my model are massive. This is a once-in-a-century shift in the global monetary architecture. Most of us, unless we get stem cells injected intravenously for the rest of our lives... perhaps, will never witness such an event again in our investing careers. The upside potential I'm predicting is bigger than SBF's (Sam Bankman-Fried) Adderall habit. You won't see the DeFi stalwarts profiting from the surge of USD-pegged stablecoins in such a bull market ever again.

Because I like to make predictions using decimal numbers ending in zero, I estimate that by 2028, the circulating supply of USD stablecoins will reach at least $100 trillion. This number is huge because the deficits Benson must finance are massive and growing exponentially. The more Benson relies on Treasury bonds to fund the government, the faster the debt pile grows, as he has to roll over debt each year.

The next key assumption is the level of the federal funds rate that Benson and the new Fed chair chosen after May 2026 will opt for. Benson has publicly stated that the federal funds rate is too high by 1.50%, while Trump usually calls for a 2.00% rate cut. Considering that overshooting tends to happen whether going up or down, I believe the federal funds rate will quickly drop to around 2.00%. This number isn't really precise, just like all establishment economists are clueless. We're all making this up as we go, so my numbers are as good as theirs. The political and economic reality of a bankrupt empire requires cheaper money, and a 2% federal funds rate conveniently delivers on that.

Lastly, where do I believe the 10-year Treasury yield will land? Benson's aim is to achieve 3% real growth. Adding the 2% federal funds rate (theoretically representing long-term inflation), we arrive at a 10-year yield of 5%. I'll use this to calculate the present value of terminal cash flows.

Using these assumptions, we arrive at the terminal value of cumulative cash flows. Since these cash flows can be provided as buybacks to token holders, we can use them as the fundamental value of a specific project. This is how I assess and predict the fully diluted valuation (FDV). I then compare the output of my model for the future with the current value, and voilà, the upside potential becomes clear.

All model inputs are in blue, and all outputs are in black.

Stablecoin Consumption

The most critical behavior of new stablecoin users is consumption for goods and services. By now, everyone is used to tapping their phone or debit/credit card on some POS system to pay for things. Using stablecoins must be just as seamless. Is there a project that allows users to deposit stablecoins into a dApp and spend them like using a Visa debit/credit card? Of course, it's called Ether.fi Cash.

Users from around the world can register in minutes and, after completing the registration process, they have their own Visa-supported stablecoin debit card. You can use it on your phone and/or with a physical card. After depositing your stablecoins into your Ether.fi wallet, you can spend them anywhere that accepts Visa. Ether.fi can even extend credit based on your stablecoin balance to turbocharge your spending.

I am an advisor and investor in the Ether.fi project, so I am obviously biased, but I have been waiting for a low-cost offline spending crypto solution for over a decade. Whether I use an American Express card or an Ether.fi Cash Card, the customer experience is the same. This is important because for the first time, many people in the global south will use a payment method backed by stablecoins and Ether.fi to pay for goods and services anywhere in the world.

The real profit is in becoming a financial supermarket, offering many of the traditional products offered by banks. Then Ether.fi can offer additional products to depositors. A key ratio I forecasted for future cash flows is the Fee / Vault Ratio. How much revenue can Ether.fi earn per dollar of stablecoin deposited? To arrive at a credible figure, I consulted the latest annual filings of JPMorgan Chase, one of the world's best-operating commercial banks. With $1.0604 trillion in deposits, they earned $18.8 billion in revenue, resulting in a Fee / Value Ratio of 1.78%.

Ether.fi Cash Vault %: This represents the percentage of the stablecoin supply deposited in the cash vault. Currently, only four months into existence, this percentage stands at 0.07%. Given that the product has just launched, I believe it is possible to increase this percentage to 1.00% by 2028.

I believe ETHFI can rise 34-fold from its current level.

Now that the commoners can spend their dollars, is there a way to get a higher return than the federal funds rate?

Stablecoin Lending

After millions of people go out and spend stablecoins to buy coffee, they will want to earn interest. I have discussed that I believe issuers like Tether will pass some of the net interest margin on to holders. However, this will not be a huge number; many savers will look for higher yields without taking on undue extra risk. Is there endogenous yield within the crypto capital market that new stablecoin users can capture? Of course, there is, and Ethena provides opportunities for higher returns.

There are only two safe ways to lend funds in the crypto capital markets. Lending to speculators through derivatives or lending to crypto miners. Ethena focuses on lending funds to bullish speculators by shorting cryptocurrency/USD futures and perpetual contracts. This is a strategy that I promoted during my time at BitMEX, which I referred to as "Cash and Carry." I later wrote an article titled "Dust on Crust," where I urged a brave entrepreneur to package this trade and offer it as a synthetic dollar, high-yield stablecoin. Ethena founder Guy Young read that article and subsequently assembled an all-star team to accomplish this daunting task and turn it into a reality. When we heard that Guy was building something, Maelstrom joined as a founding advisor. Ethena's USDe stablecoin has become the fastest-growing stablecoin in history, amassing around $13.5 billion in deposits in less than 18 months. By circulating supply, USDe is now the third-largest stablecoin, behind only Circle's USDC and Tether's USDT. Ethena's growth has been so strong that by next St. Patrick's Day, Circle CEO Jeremy Allaire will drown his sorrows in a pint of Guinness as Ethena becomes the second-largest stablecoin issuer after Tether.

Due to counterparty risk on trading platforms, the interest rate for borrowing dollars to go long on crypto payments is typically higher than the treasury bond rate. When I created perpetual contracts with the BitMEX team in 2016, I set a 10% neutral rate. This means that if the perpetual contract price is equal to the spot price, longs will pay shorts a 10% annual percentage yield (APY). Given that every perpetual contract trading platform has copied BitMEX's design verbatim, they all have a 10% neutral rate. The significance of this is that a 10% rate is well above the current federal funds rate ceiling of 4.50%. As such, the yield on pledged USDe should almost always be higher than the federal funds rate. This provides an opportunity for new stablecoin savers willing to take on a bit of extra risk to earn an average of double the Bennett-offered rate.

In the new stablecoin deposits, a portion (but certainly not all) will be deposited using Ethena to earn higher returns. Ethena takes a 20% share of the interest income. Here's a simple model:

USDe Market Share: Currently, Circle's USDC holds a 25% market share of the total circulating stablecoin supply. I believe Ethena will surpass Circle, and over time, we will see on the margin, as USDe gains deposits, USDC will lose deposits. Therefore, my long-term assumption is that USDe will achieve a 25% market share, closely following Tether's USDT.

Average USDe Yield: Given that in the long-term scenario I predict, the USDe supply will be $2.5 trillion, this will put downward pressure on the basis spread between derivatives and spot. As Hyperliquid becomes the largest derivatives exchange, they will decrease the neutral rate to increase demand for leverage. This also means that the open interest (OI) in the crypto derivatives market will grow significantly. If there are still millions of DeFi users holding trillions of dollars in stablecoin deposits available for use, they can push the OI into the trillions, which is plausible.

I believe ENA can rise 51x from its current level.

Since the common people can earn more interest income, how can they trade their way out of poverty caused by inflation?

Trade Stablecoins

The most detrimental effect of global currency devaluation is that it forces everyone, if they do not already hold a large quantity of financial assets, to become speculators to maintain their standard of living. With more people around the world now saving on-chain through stablecoins suffering from rampant fiat devaluation, they will trade the only asset class that can speculate them out of inevitable poverty—cryptocurrency. The current preferred on-chain trading venue is Hyperliquid (token: HYPE), which holds a 67% DEX market share. Hyperliquid is so transformative that it is rapidly challenging the growth of CEXs like Binance. By the end of this cycle, Hyperliquid will become the largest cryptocurrency exchange of any kind, and Jeff Yan (Hyperliquid's founder) may become richer than Binance's founder and former CEO CZ. The old king is dead. Long live the new king!

The theory that DEX will consume all other types of trading platforms is not new. What's new in the Hyperliquid case is the team's execution capability. Jeff Yan has built a team of about ten people that can deliver better products faster than any other centralized or decentralized team in the space.

The best way to understand Hyperliquid is to see it as the decentralized version of Binance. Since Tether and other stablecoins primarily power Binance's banking channels, we can consider Binance as the precursor to Hyperliquid. Hyperliquid also relies entirely on stablecoin infrastructure for deposits, but it provides an on-chain trading experience. With the launch of HIP-3, Hyperliquid is rapidly evolving into a permissionless derivatives and spot trading powerhouse. Any application wanting a central limit order book with real-time margining can integrate any derivatives market they desire through the HIP-3 infrastructure.

My prediction is that by the end of this cycle, Hyperliquid will become the largest cryptocurrency exchange of any kind, with the stablecoin supply reaching $10 trillion supercharging this growth. Taking Binance as an example, we can forecast Hyperliquid's Average Daily Volume (ADV) given a certain level of stablecoin supply.

Currently, Binance's perpetual contract ADV is $730 billion, and the total stablecoin supply is $2,770 billion; the ratio is 26.4%. You will see this represented as the Hyperliquid ADV Share in the model.

I believe HYPE can increase by 126x from its current level.

Finally, I want to talk about my most exciting junk coin stablecoin project as it is about to undergo a token issuance.

Collateralized Stablecoin

Given that millions, or possibly even billions, of people use stablecoins, how will non-crypto-native enterprises harness this new form of payment? The majority of the world's businesses face payment issues. They are charged high fees by payment processors, and many times banks are unwilling to work with them at all. However, with stablecoins in the hands of more users, businesses can free themselves from the grip of greedy traditional financial institutions. While this is a great aspiration, businesses need an easily implementable tech stack to enable them to accept stablecoin payments, pay suppliers and taxes in local currency, and account for cash flow properly.

Codex is a dedicated blockchain project for stablecoin rollout. They are not issuers currently but provide enterprises the ability to transact stablecoin-to-stablecoin, stablecoin-to-fiat, and fiat-to-stablecoin payments. Remember Fernando and his click farm. He needs to pay some of his employees in pesos to their local bank accounts. Using Codex, Fernando can receive stablecoins from his clients and convert a portion of the stablecoins into pesos directly into the local bank account. Codex has rolled out this feature and achieved $100 million in transaction volume in the first month.

The reason I am so excited about Codex is its disruption of the traditional global trade finance banking sector, removing intermediaries. Yes, while this is a massive total addressable market (TAM), the more transformative and currently untapped business is providing credit to small and medium-sized enterprises (SMEs) that were previously unable to access working capital financing. Today, Codex only provides less than a day's credit to the safest Payment Service Providers (PSPs) and fintech companies, but tomorrow, Codex could provide longer-term loans to SMEs. If an SME operates entirely on-chain and uses Codex for stablecoin payments, it can achieve triple-entry bookkeeping.

The improvement of triple-entry bookkeeping over double-entry bookkeeping is that, as all income and expense transactions are on-chain, Codex can calculate real-time net income and cash flow statements for SMEs using tamper-proof data. Based on this tamper-proof data, Codex can confidently lend to SMEs, believing that the fundamentals of the business will allow it to repay the loan principal and interest on time. Currently, in most developing countries and to some extent in developed countries, SMEs find it challenging or impossible to access bank loans. Banks understandably hesitate to take on the risk because they fear the retroactive accounting data they receive is false. Therefore, banks only lend to large corporations or politically connected elites.

In my vision, Codex will become the first truly crypto-native bank by providing loans to SMEs using stablecoin infrastructure, first targeting the largest and most impactful financial institutions globally, then in developed countries other than the United States. Codex will truly become the world's first genuine crypto bank.

Codex is still in its early stages, but if the founders succeed, they will make their users and token holders extremely wealthy. Before taking on this advisory role at Maelstrom, I ensured that the founders were prepared to pursue a tokenomics strategy similar to Hyperliquid. From day one, earned revenues will be redistributed to token holders. They might undergo a fundraising round. But I want to ensure the world knows that there is already a practical stablecoin infrastructure project transacting real volume today and about to embark on a Token Generation Event (TGE). It's time to board the faster-than-light (FTL) spaceship.

Besant's Dominion

Besant's intimidation of European dollar and non-dollar bank depositors worldwide will depend to what extent on the U.S. government's spending trajectory. I am confident that Besant's boss, U.S. President Trump, has no intention of balancing a budget, cutting taxes, or reducing expenditures. I know this because Trump warned his Red Team Republican cronies against getting too caught up in cutting spending. He somewhat jokingly said they still have to win the 2026 election. Trump has no ideology other than winning. And in a late-capitalist democratic republic, political winners distribute benefits in exchange for votes. Therefore, Besant will run rampant, with no Officer Starling around to stop him.

As the government deficit continues to widen and US hegemony declines, a significant increase in tax revenue would be unfeasible at best. Therefore, Powell will shove more and more debt down the market's throat. However, when the steward's explicit policy is to weaken a currency, the market does not want to hold debt denominated in that currency. Hence, using a stablecoin as a Treasury sink, it's time to slap on the dollar (referring to dollarization), or face sanctions again.

Powell will wildly and fiercely swing his sanction cudgel to ensure that stablecoins pegged to the dollar will repatriate capital isolated in Eurodollars and non-US retail bank deposits back home. He will commission tech bros like Zuckerberg and Musk to evangelize in far-off unbanked hinterlands. And these broligarchs will gladly drape themselves in the flag to push dollar-pegged stablecoins to their non-US users, whether local regulators like it or not, for they are PATRIOTS!

If I am right, we shall see news headlines involving these themes:

1. The need to regulate the offshore dollar market (i.e., Eurodollars)

2. Tying Fed and/or Treasury's central bank digital currency swap lines to aspects of opening the digital market to US tech companies

3. Proposals requiring stablecoin issuers to hold dollars in US bank branches and/or in Treasury securities

4. Encouraging stablecoin issuers to go public on US stock exchanges

5. US big tech firms adding crypto wallets to their social media apps

6. Trump administration officials making generally positive statements on stablecoin usage

Maelstrom remains very bullish on the stablecoin vertical, holding positions in ENA, ETHFI, and HYPE. We always look forward; hence, you will hear more about Codex as I believe it will be a key piece of stablecoin infrastructure.

Pass me some of that dollar lotion (referring to stablecoin inflows); I'm feeling a bit parched (referring to the need for capital inflows).

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