Dispatch #140: Circle Hedges Against US Debt Default, Tether Buys Bitcoin

May 19, 2023 3 min read

Dispatch

In this patch of your weekly Dispatch:

Circle and Tether adjust their reserves 🛅
Ledger’s rough week 🎭
Axie Infinity on the App Store 🏪

The Big Idea

Stablecoin Reserves

Oh, how the tables have turned.

Just a couple of months after having billions in reserves potentially stuck inside Silicon Valley Bank (SVB) as it failed, USDC issuer Circle is taking steps to ensure that it isn’t hit by a potential US government default.

The Circle Reserve Fund managed by Blackrock moved $8.7B out of US Treasuries that mature beyond the end of May and into overnight repurchase or repo agreements which provide additional liquidity. Circle CEO Jeremy Allaire said “We don’t want to carry exposure through a potential breach of the ability of the U.S. government to pay its debts.”

Tether also made a big announcement about its own reserves. Going forward, the USDT issuer will allocate up to 15% of its realized profits from investments to purchase Bitcoin that it custodies itself and adds to its reserve surplus.

CTO Paolo Ardoino said “Our investment in Bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology.”

Hot, hot, hot.

The Latest In…

Ledger Under Fire

Ledger is going to need to Recover after this week. On Tuesday, they announced a new product designed to give piece of mind to less tech-savvy users. How? By creating a backup of the Ledger wallet’s seed phrase, splitting it into three, and keeping them in three separate companies.

Well friends, when Crypto Twitter heard this it damn near lost its mind. Some of the complaints were about new security risks from things like ID verification. But the biggest uproar was about the fact that Ledger had previously been clear that the seed phrase *could* never leave the hardware device. Despite the turmoil, Ledger is right that for mainstream audiences, seed recovery is an important user experience.

How do you see this playing out?

The Latest In…

X-To-Earn

Remember when the whole world was going to earn crypto for doing, well, anything? One of the big leaders of that trend was Axie Infinity, the game that put play-to-earn on the map. Well, this week, Axie got a huge boost when it listed its game in Apple’s App store. The game currently has around 1.5M installations, but with Latin America and Asia that number could surge upward. Speculation around exactly that pumped the price of Axie’s native crypto $AXS. Open interest also nearly doubled, reaching its highest level since February. Maybe the TO EARN trend has some life yet?

The Latest In…

Global Recession?

Explore the potential impact of an economic recession on the crypto market? Sure we can.

The Federal Reserve's monetary policies, particularly interest rate adjustments, play a crucial role in the economy and can affect the crypto market.
During a recession, the Fed typically lowers rates to stimulate activity.
Bitcoin, often considered a hedge against financial market instability, may offer an alternative investment, while stablecoins could also play a significant role in preserving capital.
Institutional investors' participation in the crypto market during a recession could stabilize or exacerbate volatility.

And while the impact for crypto remains uncertain, monitoring economic indicators and policy decisions is crucial. Follow Nexo Prime on Twitter where we outline key macro announcements at the start of the week.

The Week’s Most Interesting Data Story

Solana Daily Active Addresses Higher than Bull Market Peak

Holy wow, Solana. In the last few days, Solana has added over 600,000 active addresses to reach more than 1,000,000 total. What explains the jump? First, there were a number of token experiments that involved a significant number of transactions. But the surge started before that and seems to align with the peak congestion and high fees that have characterized both Ethereum and Bitcoin recently. Ethereum’s finality issues also might have helped drive users to Solana as well. Low-cost, high-speed blockchain for the win?