Author: Arthur Hayes, Founder of BitMEX
Translation: BitpushNews
(The views expressed in this article are solely those of the author and should not be considered as investment advice or recommendations for trading.)
U.S. Treasury Secretary Scott Bessent should have a new nickname. I once called him "BBC," which stands for "Big Bessent Cock." While his aggressive maneuvers are reshaping the global financial system, this moniker still fails to fully capture the impact he is having. I believe a more fitting title is needed to describe the shockwaves he will create in two key areas: the Eurodollar banking system and foreign central banks.
Like the serial killer in the movie "The Silence of the Lambs"—a classic worth watching for any newcomer late at night—Scott "Buffalo Bill" Bessent is preparing to reshape the Eurodollar banking system and take control of foreign non-dollar deposits. In ancient Rome, slaves and elite legions maintained the "Pax Romana"; in modern times, the dollar's hegemony upholds "Pax Americana." The "enslavement" in Pax Americana does not only refer to the African slaves transported to the Americas in history; today, it takes the form of monthly debt repayments—generations of young people voluntarily taking on heavy debts just to obtain worthless degrees, hoping to land jobs at top firms like Goldman Sachs, Sullivan & Cromwell, or McKinsey. This form of control is broader, more insidious, and effective. Unfortunately, with the rise of artificial intelligence, these heavily indebted individuals may face unemployment risks.
Let me digress.
This article will discuss the dollar's control over global reserve currencies under "Pax Americana." The effectiveness of various U.S. Treasury Secretaries in wielding the dollar as a financial scepter has varied. The most notable failure has been the inability to prevent the formation of the Eurodollar system.
The Eurodollar system emerged in the 1950s and 60s, originally intended to circumvent U.S. capital controls (such as Regulation Q), evade economic sanctions (the Soviet Union needed a channel to store dollars), and provide banking services for non-U.S. trade flows during the post-World War II economic recovery. At that time, monetary authorities could have recognized the demand for dollars abroad and allowed major domestic financial institutions to take on this business, but domestic political and economic considerations forced them to take a hardline stance. As a result, the Eurodollar system expanded over the following decades, developing into a financial force that cannot be ignored. It is estimated that the volume of Eurodollar deposits circulating in non-U.S. bank branches ranges between $10 trillion and $13 trillion. The flow of this capital has triggered multiple financial crises post-war, each requiring money printing to bail out. A paper published by the Atlanta Fed in August 2024 titled "Offshore Dollars and U.S. Policy" analyzed this phenomenon.
For "Buffalo Bill" Bessent, there are two main issues with the Eurodollar system. First, he knows almost nothing about the scale of Eurodollars and how these funds are being used. Second, and more critically, these Eurodollar deposits are not being used to purchase the low-quality U.S. Treasuries he holds. So, does Bessent have a way to address both issues simultaneously? Before answering that, let’s briefly review the foreign exchange holdings of non-U.S. retail depositors.
De-dollarization is indeed happening. It significantly accelerated in 2008 when U.S. financial leaders chose to rescue banks and financial institutions facing collapse due to bad bets with unlimited quantitative easing (QE Infinity), rather than allowing them to fail naturally. An effective indicator of how global central banks are responding to holding trillions of dollars in dollar-denominated assets is the proportion of gold in their foreign exchange reserves. The higher the proportion of gold in reserves, the lower the trust in the U.S. government.
As can be observed, since the 2008 financial crisis, the proportion of gold in central bank reserves has bottomed out and begun a long-term upward trend.
This is the TLT U.S. ETF, which tracks U.S. Treasuries with maturities of 20 years and above, dividing their price by the price of gold. I have indexed it to 100 starting from 2009. Since 2009, the value of U.S. Treasuries relative to gold has fallen by nearly 80%. The U.S. government's monetary policy is to rescue its banking system while sacrificing domestic and foreign creditors. It’s no wonder foreign central banks are starting to hoard gold like Scrooge McDuck in "DuckTales." Former U.S. President Trump also intended to adopt a similar strategy, but in addition to targeting bondholders, he believed he could tax foreign capital and trade flows through tariffs to "Make America Great Again."
Bessent actually finds it difficult to persuade foreign central bank reserve managers to buy more Treasuries. However, there exists a large population in the Global South that is underserved by dollar financial services, who are eager to have a positive-yielding dollar account. As you know, all fiat currencies are trash compared to Bitcoin and gold. But within the fiat currency system, the dollar remains the best choice. Domestic regulators, who dominate most of the global population, force their citizens to hold high-inflation inferior currencies and limit their access to the dollar financial system. These individuals would buy the Treasuries offered by Bessent just to escape their poor domestic bond markets. So, does Bessent have a way to provide banking services to these people?
I first visited Argentina in 2018 and have returned almost every year since. This chart shows the ARS/USD index since September 2018 (baseline 100). Over seven years, the Argentine peso has depreciated by 97% against the dollar. Now when I go there, most of the time I ski, and I pay all service staff in USDT.
"Buffalo Bill" Bessent has found a new tool to solve his problems—that is, dollar-pegged stablecoins. The U.S. Treasury is now promoting the development of these stablecoins, and the empire will support specific issuers to help them consolidate Eurodollar systems and retail deposits in the Global South. To understand this, I will first briefly introduce the structure of "acceptable" dollar-pegged stablecoins, then discuss their impact on the traditional banking system. Finally, and of most concern to the crypto community, I will explain why the global promotion of dollar-pegged stablecoins supported by Pax Americana will drive the long-term growth of decentralized finance (DeFi) applications, especially Ethena, Ether.fi, and Hyperliquid.
As you know, Maelstrom is not working for free. We have packages upon packages, never-ending.
If you’re still not satisfied with stablecoins, I will mention a new stablecoin infrastructure project we are advising—Codex. I believe it will become the best-performing token from the upcoming Token Generation Event (TGE) until the end of this cycle.
What is an "acceptable" stablecoin?
Dollar-pegged stablecoins are similar to narrow banks. Issuers accept dollars and invest these dollars in risk-free bonds. In nominal dollar terms, the only risk-free bond is U.S. Treasuries. Specifically, since stablecoin issuers must be able to provide physical dollars when holders redeem, they will only invest in short-term Treasury bills (T-bills), which are bonds with maturities of less than one year. With almost no duration risk, their trading behavior is nearly equivalent to cash.
Taking Tether USD (USDT) as an example:
An Authorized Participant (AP) wires dollars into Tether's bank account.
Tether creates 1 USDT for every 1 dollar deposited.
To generate yield on these dollars, Tether purchases Treasury bills (T-bills).
For example: If an AP wires in 1,000,000 dollars, they will receive 1,000,000 USDT.
Tether uses this 1,000,000 dollars to purchase an equivalent amount of T-bills.
USDT itself does not pay interest, but these T-bills actually pay the Federal Reserve's fund rate, currently around 4.25% to 4.50%.
Thus, Tether earns a net interest margin (NIM) of 4.25% to 4.50%.
To attract more deposits, Tether or related financial institutions (such as crypto exchanges) will pay a portion of the NIM to users willing to stake USDT. Staking means locking USDT for a period in exchange for interest earnings.
The redemption process for stablecoins is as follows:
An Authorized Participant (AP) sends USDT to Tether's crypto wallet.
Tether sells the corresponding T-bills for the dollar amount corresponding to the USDT.
Tether wires 1 dollar for each USDT to the AP's bank account.
Tether destroys the corresponding USDT, removing it from circulation.
Tether's business model is very simple: accept dollars, issue digital tokens on a public blockchain, invest dollars in T-bills, and earn a net interest margin (NIM).
Bessent will ensure that the stablecoin issuers supported by the empire can only deposit dollars in chartered U.S. banks or invest in Treasury bonds. There will be no "flashy" operations.
Impact of the Eurodollar System
Before the emergence of stablecoins, the U.S. Federal Reserve and Treasury would always step in to rescue Eurodollar banking institutions when problems arose. A well-functioning Eurodollar market is crucial for the overall health of the empire. However, now Bessent has a new tool to absorb these capital flows. On a macro level, he must provide reasonable incentives for Eurodollar deposits to go on-chain.
For example, during the 2008 global financial crisis, the Federal Reserve secretly provided billions of dollars in loans to foreign banks that were short on dollars due to the collapse of subprime mortgages and their related derivatives. As a result, Eurodollar depositors generally believed that the U.S. government implicitly guaranteed their funds, even though technically they were outside the U.S. regulatory system. If it were announced that non-U.S. bank branches would not receive assistance from the Federal Reserve or the Treasury in future financial crises, Eurodollar deposits would be directed into the arms of stablecoin issuers. If you think this is an exaggeration, a strategist at Deutsche Bank publicly questioned whether the U.S. would use dollar swap tools to force Europe to comply with the demands of the Trump administration. It is certain that Trump would love to weaken the Eurodollar market by effectively "de-banking" it—these institutions had "de-banked" his family business after his first term, and now it was time for revenge. The consequences of karma are indeed brutal.
Without guarantees, Eurodollar depositors would, in their own interest, transfer their funds into dollar-pegged stablecoins like USDT. Tether's assets are entirely held in the form of deposits in U.S. banks or Treasury bills (T-bills). Legally, the U.S. government guarantees all deposits at the eight "too big to fail" (TBTF) banks; after the regional bank crisis in 2023, the Federal Reserve and Treasury effectively guaranteed all deposits at U.S. banks or branches. The default risk of T-bills is almost zero because the U.S. government will never voluntarily go bankrupt—it can always print dollars to repay bondholders. Therefore, stablecoin deposits are risk-free in nominal dollars, while Eurodollar deposits are no longer so.
Soon, dollar-pegged stablecoin issuers will see an influx of $10 to $13 trillion in funds, which will subsequently be used to purchase T-bills. Stablecoin issuers will become large, price-insensitive buyers of the Treasuries issued by Bessent!
Even if Federal Reserve Chairman Powell continues to obstruct Trump's monetary agenda, unwilling to lower the federal funds rate, end balance sheet reduction, or restart quantitative easing, Bessent can offer T-bills at rates below the federal funds rate. He can do this because stablecoin issuers must purchase his products at the given rate to make a profit. In just a few steps, Bessent has taken control of the front end of the yield curve. The continued existence of the Federal Reserve has become meaningless. Perhaps a statue of Bessent will stand in some square in Washington, styled after Cellini's "Perseus with the Head of Medusa," named "Bessent and the Head of the Jekyll Island Monster."
Impact on the Global South
U.S. social media companies will become a Trojan horse, undermining foreign central banks' ability to control the money supply for their ordinary citizens. In the Global South, the penetration of Western social media platforms (Facebook, Instagram, WhatsApp, and X) is nearly universal.
I have lived in the Asia-Pacific region for half my life. There, converting depositors' local currency into dollars or dollar-equivalent assets (like the Hong Kong dollar) to earn dollar yields and invest in U.S. stocks is a significant part of the investment banking business in the region.
Local currency regulators implement a "whack-a-mole" style of regulation against traditional financial institutions (TradFi) to block capital outflows. Governments need to control the funds of ordinary citizens and, to some extent, wealthy individuals with non-political connections to absorb funds through inflation taxes, support underperforming state-owned enterprises, and provide low-interest loans to heavy industries. Even if Bessent wanted to use large U.S. financial center banks as a starting point to provide banking services to those in urgent need of funds, local regulations have prohibited this practice. However, there is another, more effective way to reach these funds.
Everyone, except for mainland China, is using Western social media companies. What if WhatsApp launched a cryptocurrency wallet for every user? Within the app, users could seamlessly send and receive approved dollar-pegged stablecoins (like USDT). What would happen if this WhatsApp stablecoin wallet could also transfer to any wallet on different public chains?
Let’s illustrate with a fictional case how WhatsApp could provide digital dollar accounts for billions of users in the Global South:
Fernando is a Filipino who runs a click farm in the countryside, creating fake followers and views for social media influencers. Since his clients are all outside the Philippines, receiving payments is both difficult and expensive. WhatsApp has become his primary payment tool because it provides a wallet for sending and receiving USDT. His clients also use WhatsApp and are willing to stop using the inefficient banking system. Both parties are satisfied, but this effectively bypasses the local Philippine banking system.
After a while, the Central Bank of the Philippines notices a significant outflow of bank funds. They realize that WhatsApp has widely promoted dollar-pegged stablecoins domestically, and the central bank has effectively lost control over the money supply. However, they are almost powerless to stop it. The most effective way to prevent Filipinos from using WhatsApp would be to cut off the internet. Even attempts to pressure local Facebook executives would be futile. Mark Zuckerberg rules Meta from his sanctuary in Hawaii and has received approval from the Trump administration to promote stablecoin features for Meta users globally. Any legal restrictions on U.S. tech companies on the internet would provoke threats from the Trump administration to raise tariffs. Trump has explicitly threatened the EU with higher tariffs if it does not repeal "discriminatory" internet legislation.
Even if the Philippine government removes WhatsApp from the Android and iOS app stores, determined users can easily bypass the blockade using a VPN. Of course, any friction will affect usage, but social media is essentially an addictive substance for the masses. After more than a decade of continuous dopamine stimulation, ordinary people will find any way to continue using the platform.
Ultimately, Bessent can leverage sanctions as a tool. Asian elites store their wealth in overseas dollar banking centers and naturally do not want their wealth devalued by domestic monetary policy. Do as I say, not as I do. Suppose Philippine President Bongbong Marcos threatens Meta; Bessent could immediately retaliate by sanctioning him and his associates, freezing their billions in overseas wealth unless they yield and allow stablecoins to spread in their country. His mother, Imelda, knows how long the arm of U.S. law can be; she and her late dictator husband Ferdinand Marcos faced RICO charges for misappropriating Philippine government funds to purchase real estate in New York. It is certain that Bongbong Marcos does not want to go through that ordeal again.
If my argument is correct, that stablecoins are the core tool of Pax Americana (U.S. hegemonic monetary policy) to expand the use of the dollar, then the empire will protect U.S. tech giants from local regulatory retaliation while providing ordinary citizens with dollar banking services. And these governments will be almost powerless to stop it.
Assuming my judgment is valid, how large is the potential total addressable market (TAM) for stablecoin deposits from the Global South? The most advanced group of countries in the Global South is the BRICS nations. Excluding China, as it has banned Western social media companies. The question is, how much is the scale of local currency bank deposits? I consulted Perplexity, and the answer it provided was $4 trillion. I know this may be controversial, but I think it is reasonable to include the countries in the "Euro poverty zone" that use the euro. The euro is already "on its last legs" under Germany-first and France-first economic policies, and the Eurozone will eventually be split. With future capital controls, by the end of this century, the euro's only practical use may be to pay for Berghain's entrance fee and Shellona's minimum consumption.
Adding the $16.74 trillion in European bank deposits to the calculation brings the total close to about $34 trillion, indicating that the potential stablecoin deposit market is extremely large.
Go Big or Get Taken Down by the Democrats
Buffalo Bill Bessent faces a choice: either go big or let the Democrats win. Does he want the red team to win in the 2026 midterm elections and, more importantly, in the 2028 presidential election? I believe he hopes so, and the only way to achieve this goal is to support Trump in providing ordinary citizens with more benefits than Mamdanis and AOCs. Therefore, Bessent needs to find a buyer for Treasuries who does not care about price. Clearly, he sees stablecoins as part of the solution, as evidenced by his public support for this technology. But he must go all in.
If the Eurodollars from the Global South, the euro poverty zone, and Europe do not flow into stablecoins, he must use his "heavy-handed tactics" to force the funds in. This means either flowing into dollars as required or facing sanctions again.
Purchasing power generated by the Treasuries from dismantling the Eurodollar system: $10–13 trillion
Retail deposit purchasing power from the Global South and euro poverty zone: $21 trillion
Totaling approximately $34 trillion
Clearly, not all funds will flow into dollar-pegged stablecoins, but at least we can see the enormous potential addressable market.
The real question is, how will this up to $34 trillion in stablecoin deposits drive DeFi usage to new heights? If there is sufficient reason to believe that DeFi usage will grow, which crypto projects will benefit the most?
The Logic of Stablecoin Inflows into DeFi
The first concept to understand is staking. Suppose a portion of this $34 trillion already exists in stablecoin form. To simplify, let’s assume all inflows go into Tether's USDT. Due to fierce competition from other issuers like Circle and large TBTF banks, Tether must share part of its net interest margin (NIM) with holders. They collaborate with some exchanges to allow USDT staked in exchange wallets to earn interest, which is paid in the form of newly issued USDT.
Here’s a simple example:
Fernando in the Philippines has 1,000 USDT. The Philippine exchange PDAX offers a 2% staking yield. PDAX creates a staking smart contract on Ethereum. Fernando sends 1,000 USDT to the smart contract address, and then the following happens:
His 1,000 USDT becomes 1,000 psUSDT (PDAX staked USDT, PDAX's liability). Initially, 1 USDT = 1 psUSDT, but as interest accumulates daily, psUSDT gradually appreciates. For example, using a 2% annual interest rate and simple interest calculated as ACT/365, psUSDT grows by about 0.00005 each day. After one year, 1 psUSDT = 1.02 USDT.
Fernando receives 1,000 psUSDT in his exchange wallet.
A powerful thing happens: Fernando locks his USDT in PDAX in exchange for an interest-generating asset, psUSDT. psUSDT can now be used as collateral in the DeFi ecosystem, exchanged for other cryptocurrencies, used for collateralized lending, leveraged derivatives trading on DEXs, and more.
A year later, if Fernando wants to exchange psUSDT back to USDT, he simply needs to unstake it on the PDAX platform, where psUSDT is destroyed, and he receives 1,020 USDT. The additional 20 USDT in interest comes from Tether's collaboration with PDAX. Tether creates extra USDT from the net interest margin (NIM) earned on its Treasury portfolio, which is paid to PDAX to fulfill contractual obligations.
Thus, both USDT (the base currency) and psUSDT (the yield-bearing currency) become acceptable collateral in the DeFi ecosystem. In this way, a portion of the overall stablecoin flow will enter DeFi applications (dApps). Total Value Locked (TVL) is used to measure this interaction. Users must lock funds when operating in a DeFi dApp, and this portion of funds is reflected as TVL. TVL is a leading indicator of trading volume and future revenue, and it is an important basis for predicting the future cash flows of DeFi dApps.
Before analyzing how TVL affects a project's future earnings, I will first outline the main assumptions used in the financial models that follow.
Model Assumptions
Next, I will present 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 chose to forecast until the end of 2028 because that is when Trump is expected to leave office. My baseline assumption is that the probability of a blue team (Democratic Party) president being elected is slightly higher than that of a red team (Republican Party). The reason is that Trump, in less than four years, will not be able to completely rectify the losses suffered by his supporters due to half a century of accumulated impacts from monetary, economic, and foreign policies. Worse still, no politician will fully deliver on campaign promises. Therefore, the voter turnout of red team voters will decline.
Grassroots red team voters lack enthusiasm for Trump's successor and will not show up in sufficient numbers to vote, thus being surpassed by blue team voters influenced by Trump Derangement Syndrome (TDS) who are childless cat owners. Any member of the blue team who comes to power will implement unfavorable monetary policies due to TDS, merely to prove they are different from Trump. But ultimately, no politician can resist printing money, and dollar-pegged stablecoins become the best price-insensitive buyers of short-term Treasuries. Therefore, while the new president may not initially fully support stablecoins, they will soon realize that lacking this capital will make it difficult to proceed, ultimately continuing the aforementioned policies. This policy oscillation will trigger a bubble burst in the crypto market, leading to an epic bear market.
Moreover, the numbers in my models are enormous. This is a once-in-a-century transformation of the global monetary system. Unless we are continuously injected with stem cells for life, most investors may never encounter a similar event again. I predict that the potential returns will far exceed SBF's amphetamine habit. Driven by the widespread adoption of dollar-pegged stablecoins, the bull market in the DeFi ecosystem will be unprecedented.
Because I prefer to use decimal numbers ending in zero for predictions, I estimate that by 2028, the total circulation of dollar-pegged stablecoins will reach at least $10 trillion. This figure is so large because the deficit that Bessent must finance is extremely large and growing exponentially. The more Bessent finances with Treasuries, the faster the debt accumulates, as he must roll over the debt each year.
The next key assumption is what level Bessent and the new Federal Reserve chair after May 2026 will set the federal funds rate at. Bessent has publicly stated that the federal funds rate is 1.50% too high, while Trump often calls for a 2.00% rate cut. Considering that policies often overshoot, I believe the federal funds rate will ultimately settle quickly at around 2.00%. This number is not strictly based, just like institutional economists, we are all making impromptu judgments, so my numbers are as reliable as theirs. Political and economic realities require the empire to provide cheap funding, and a 2% rate fits this need perfectly.
Finally, my prediction for the 10-year Treasury yield: Bessent's target is to achieve a 3% real growth rate, plus a 2% federal funds rate (theoretically representing long-term inflation levels), resulting in a 10-year yield of about 5%. I will use this yield to calculate the present value of terminal cash flows.
Based on these assumptions, we can derive the terminal value of cumulative cash flows. Since these cash flows can be used for token buybacks, they can serve as the fundamental value of specific projects. This is how I estimate and predict the Fully Diluted Value (FDV). I will then compare the model's predicted results with the current market value to clearly reveal the potential upside.
All model inputs are displayed in blue, and outputs are shown in black.
Spending It
The most important behavior of new stablecoin users is to use them to purchase goods and services. Nowadays, everyone is accustomed to tapping their phones or debit/credit cards on payment systems. Stablecoins must also be just as convenient and easy to use. Which project allows users to deposit stablecoins into decentralized applications (dApps) and spend them like using a Visa debit/credit card? Of course, there is one; it’s called Ether.fi Cash.
Global users can register in just a few minutes, and after completing the onboarding process, they receive their Visa-supported stablecoin spending card. You can use it on your phone or through a physical card. After depositing stablecoins into the Ether.fi wallet, you can spend them anywhere that accepts Visa. Ether.fi can even provide credit limits based on your stablecoin balance, allowing your spending power to "accelerate."
I am both an advisor and an investor in the Ether.fi project, so I am obviously biased, but I have been waiting for a low-fee offline crypto spending solution for over ten years. Whether I use an Amex or an Ether.fi Cash card, the customer experience is almost identical. This is very important because it allows many people in the Global South to use stablecoins and Ether.fi to pay for goods and services globally for the first time.
The core highlight is to build it as a financial supermarket, offering a variety of products from traditional banks. Subsequently, Ether.fi can provide more value-added products for depositors. I predict that the key ratio for future cash flows is the "Fee / Vault Ratio": how much revenue does Ether.fi earn for every dollar of stablecoin deposited? To arrive at a defensible number, I consulted the latest annual report of the world's best-managed commercial bank—JPMorgan. On a deposit base of $106.04 billion, they achieved $18.8 billion in revenue, resulting in a Fee / Vault Ratio of 1.78%.
Ether.fi Cash deposit ratio: This metric indicates how much stablecoin is deposited into the cash vault. Currently, this product has only been launched for four months, and the deposit ratio is 0.07%. Given that the product has just gone live, I believe this ratio is expected to grow to 1.00% by 2028.
Based on this, I believe $ETHFI has the potential to increase 34 times compared to its current price.
Now that ordinary users (plebes) can spend stablecoins, is there a way to earn higher returns than the federal funds rate?
Lending Opportunities
As more people start using stablecoins to buy coffee, they naturally also want to earn interest. I previously mentioned that issuers like Tether will distribute part of the net interest margin (NIM) to holders, but this amount will not be large; many savers will seek to earn higher returns without taking on too much additional risk. So, is there new endogenous yield within the crypto capital markets that new stablecoin users can capture? The answer is yes; Ethena provides opportunities for higher yields.
In the crypto capital markets, there are only two ways to safely lend funds: lending to speculators for derivative trading or lending to crypto miners. Ethena focuses on lending to speculators, hedging long crypto positions by shorting crypto/dollar futures and perpetual swaps. This is the strategy I referred to as "cash and carry" during my promotion at BitMEX. I later wrote an article titled "Dust on Crust," calling on entrepreneurs to package this trade into synthetic dollars and high-yield stablecoins. After reading the article, Ethena founder Guy Young assembled a top team to put it into practice. Maelstrom subsequently became a founding advisor. Ethena's USDe stablecoin rapidly accumulated about $13.5 billion in deposits within 18 months, becoming the fastest-growing stablecoin, currently ranking third in circulation, only behind Circle's USDC and Tether's USDT. Ethena's growth is so rapid that by next St. Patrick's Day, it will become the second-largest stablecoin issuer after Tether, leaving Circle CEO Jeremy Allaire to drink a Guinness to drown his sorrows.
Due to counterparty risk on exchanges, the interest rates for speculators borrowing dollars to go long on crypto assets are usually higher than Treasury rates. When I created perpetual contracts with the BitMEX team in 2016, I set the neutral interest rate at 10%. This means that if the perpetual contract price equals the spot price, the long position pays the short position an annualized interest rate of 10%. Every perpetual contract exchange designed after BitMEX adopted this 10% neutral interest rate. This is important because 10% is far above the current federal funds rate ceiling of 4.5%. Therefore, the yield on staked USDe is almost always higher than Fed Funds, providing new stablecoin depositors willing to take on a small amount of additional risk with an opportunity to earn an average of double the returns offered by Buffalo Bill Bessent.
Some (but not all) new stablecoin deposits will be saved through Ethena to earn higher yields. Ethena takes 20% of the interest income as a fee. Here’s a simple model:
USDe market share: Currently, Circle's USDC has a market share of 25% among circulating stablecoins. I believe Ethena will surpass Circle, and over time, we will see that the outflow of USDC deposits is exactly absorbed by USDe. Therefore, my long-term assumption is that USDe will capture 25% market share after Tether's USDT.
USDe Average Yield: In my long-term scenario prediction, the supply of USDe will be $2.5 trillion, which will exert downward pressure on the basis between derivatives and spot prices. As Hyperliquid becomes the largest derivatives exchange, they will lower the neutral interest rate to increase leverage demand. This also means that the open interest (OI) in the crypto derivatives market will grow significantly. If millions of new DeFi users have trillions of dollars in stablecoin deposits at their disposal, they will be fully capable of pushing open interest to the trillion-dollar level.
Based on this, I believe the value of $ENA has the potential to increase 51 times from its current level.
Now that the common people can earn more interest income, the question is: how can they trade their way out of the poverty brought on by inflation?
Trade It
One of the most severe impacts of global currency devaluation is that it forces everyone to become a speculator to maintain their standard of living—if they do not already have a large pile of financial assets. As more people long affected by the arbitrary devaluation of fiat currency begin to save on-chain through stablecoins, they will trade the only asset class that offers them a chance to escape poverty through speculation—cryptocurrency.
Currently, the preferred platform for on-chain trading is Hyperliquid (token: $HYPE), which has captured a 67% market share in the decentralized exchange (DEX) market. Hyperliquid is highly transformative, and its growth rate even surpasses centralized exchanges (CEX) like Binance. By the end of this cycle, Hyperliquid is expected to become the largest crypto exchange, and Jeff Yan may be wealthier than Binance's founder and former CEO CZ.
The king has passed, and a new king must rise!
The theory that DEX will consume all other types of exchanges is not new, but what sets Hyperliquid apart is the execution of its team. Jeff Yan has assembled a team of about ten people, whose product iteration speed and quality surpass any centralized or decentralized team in the industry.
The simplest way to understand Hyperliquid is to view it as a decentralized version of Binance. Since Tether and other stablecoins primarily support Binance's funding channels, Binance can be seen as a predecessor to Hyperliquid. Hyperliquid also relies entirely on stablecoin infrastructure for deposits but offers an on-chain trading experience. With the launch of HIP-3, Hyperliquid is rapidly transforming into a permissionless derivatives and spot giant. Any application wishing to have a high liquidity limit order book and achieve real-time margin management can integrate the required derivatives market through HIP-3.
I predict that by the end of this cycle, Hyperliquid will become the largest crypto exchange, and the growth of stablecoin circulation reaching $10 trillion will further accelerate this development. Taking Binance as an example, we can predict Hyperliquid's average daily trading volume (ADV) based on the level of stablecoin supply.
Currently, Binance's average daily trading volume for perpetual contracts is $73 billion, with a total stablecoin supply of $277 billion; the ratio is 26.4%. In the model, this ratio will represent Hyperliquid's ADV market share.
I believe $HYPE has the potential to increase 126 times from its current level.
Finally, I want to introduce a stablecoin project that I am most looking forward to, which is about to conduct a token issuance.
Enterprise Applications of Stablecoins
As millions or even billions of users begin to use stablecoins, how can enterprises leverage this payment method? Most businesses globally still face high fees and banking restrictions when it comes to payments. As more users hold stablecoins, businesses can bypass traditional banks to achieve convenient payments, which requires an easy-to-use technical system that allows businesses to accept stablecoin payments, pay suppliers, pay taxes, and manage cash flow.
Codex is such a project, launching a blockchain specifically designed for stablecoins. Codex itself is not an issuer but provides stablecoin and fiat payment solutions between enterprises, enabling seamless conversion between stablecoins and fiat. Returning to Fernando and his click farm, he needs to pay his employees in pesos to a local bank account. Through Codex, he can convert part of the stablecoins paid by customers into pesos and deposit them directly into the bank account. Codex has already achieved this functionality, with a transaction volume of $100 million in its first month.
More importantly, Codex has the potential to provide credit support to small and medium-sized enterprises (SMEs). Currently, it only offers short-term credit to the safest payment service providers, but in the future, it could provide long-term loans to SMEs. If businesses are fully on-chain and use Codex to handle payments, they can achieve "triple entry bookkeeping"—with all income and expenses recorded on-chain, allowing lenders to assess the financial status of businesses in real-time and with confidence provide loans. Currently, traditional banks typically only lend to large corporations or wealthy individuals with political connections, making it difficult for SMEs to obtain financing.
In my vision, Codex will first serve the Global South market and then expand to developed countries outside the United States. By providing loans to SMEs through stablecoin infrastructure, Codex is poised to become the first true crypto bank.
Codex is still in its early stages, but if successful, it will greatly benefit users and token holders. Before Maelstrom became an advisor, I ensured that the founding team was ready to adopt a token economic strategy similar to Hyperliquid, allowing revenue to flow directly back to token holders. Codex already has real transaction volume and is about to conduct a token issuance, making it a great opportunity to enter the stablecoin infrastructure space.
Buffalo Bill Bessent's Strategy
Buffalo Bill Bessent's control over global Eurodollars and non-dollar deposits depends on the fiscal policy of the U.S. government. I believe that Bessent's boss—U.S. President Trump—has no intention of cutting spending or balancing the budget. His only goal is to win the election. Political winners in late-stage capitalist democracies gain votes by distributing benefits. Therefore, Bessent will take bold actions in the fiscal and monetary realms, and no one can stop him.
As the U.S. deficit continues to expand and Pax Americana's global hegemony weakens, the market is unwilling to hold weak dollar debt. Bessent's use of stablecoins to absorb Treasuries becomes an inevitable means.
He will widely use sanctions to ensure that dollar stablecoins absorb funds flowing out of Eurodollars and non-U.S. retail banks. At the same time, he will mobilize tech giants (like Zuckerberg and Musk) to promote stablecoins, popularizing them among global users, even if local regulations do not allow it, they will be protected by the U.S. government.
Possible Trends
If my judgment is correct, we may see the following trends:
The offshore dollar market (Eurodollar) comes under regulatory scrutiny
The dollar swap limits between the Federal Reserve and the Treasury are linked to U.S. tech companies entering the digital market
Stablecoin issuers are required to hold dollars or Treasuries
Encouragement for stablecoin issuers to list in the U.S.
U.S. tech companies increase crypto wallet features in social media applications
The Trump administration openly supports the use of stablecoins
Maelstrom will continue to heavily invest in the stablecoin sector, holding $ENA, $ETHFI, and $HYPE. Meanwhile, Codex will become a core project in the stablecoin infrastructure.
Final words: Quickly pass me the dollar "lotion," my skin is getting dry.
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