“Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.” – Arthur Conan Doyle
I didn’t start out to write a crypto Substack. Honestly! In fact, I woke up this morning committed to finding something new and scary to write about this week. Naturally, I turned to Twitter. Imagine my chagrin when the Twitter algorithm insisted I digest these tweets instead:
I’ll save you the counting – that’s slightly more than $6.2 billion of new USDC supply. Billion. With a B. Are you surprised Bitcoin is recovering this morning? I’m not. That bounty has to go somewhere, right? Coin printer go BRRR.
According to coinmarketcap.com, the total circulating supply of USDC is now over $20.6 billion, up $16.7B year-to-date (+122% coins minted since the most recent reserves attestation of February 2021). The largest US dollar stablecoin, Tether, currently sits at just under $60 billion, up $38.7 billion so far this year. Binance USD, the third largest US dollar stablecoin, is approaching $9 billion of supply, up $7.7 billion over the same time period.
We are led to believe that Tether, USDC and Binance USD combined have $90 billion in US dollar denominated reserves sitting in respected institutions willing to provide banking services to the crypto sector, up $63 billion so far in 2021. Okay. Sure.
Let’s put these numbers into perspective. I fired up my Bloomberg terminal and keyed in the FFLO function, a wonderful tool for tracking funds flowing into (and out of) ETFs all over the world. I selected United States and sorted by year-to-date flows. Not surprisingly, the ETFs seeing the largest inflows so far in 2021 are Vanguard S&P 500 ETF (VOO), Vanguard Total Stock Market Index Fund ETF (VTI), Financial Select Sector SPDR Fund ETF (XLF), iShares Core S&P 500 ETF (IVV), and Vanguard Total Bond Market Index Fund ETF (BND). These are behemoths. The biggest of the biggest passive ETFs in the world.
Consider the pace of stablecoin minting relative to these ETF inflows…
Does this look impossible to you? It sure does to me. As one of my good friends likes to say, I don’t know what the truth is, but it sure ain’t that.