Stablecoin Myth Exposed: Market Interventions Reveal Dollar Volatility

The narrative that stablecoins are risk-free assets has been debunked by recent market interventions. The idea is that since dollars are stable, digital currencies tied to their value should also be stable. However, this assumption ignores the fact that the dollar's value fluctuates constantly.

Since 1971, when the US abandoned the gold standard, the dollar's value has been a moving target in global currency markets. Treasury interventions in foreign exchange rates, such as the recent intervention in the Japanese yen's slide against the dollar, demonstrate the willingness of monetary authorities to intervene in price instability.

Crypto exchanges that hold stablecoins are essentially operating like banks, but without the same regulatory burden. They claim to be risk-free because their value is tied to dollars. However, this ignores the fact that Treasury yields move up and down for various reasons, real or artificial, affecting the value of dollar derivatives.

U.S. Treasury securities exist as dollar income streams, which stablecoin warehouses use to fund their 'rewards' through short-term Treasuries purchases. This practice has been questioned by some, who point out that Treasury secretary Scott Bessent intervened in Treasury markets to lower yields.