USDC faces growing pressure from rising bank rates, but Visa's expansion could offset it
Key Summary
Stablecoin USD Coin [USDC] faces declining growth due to rising bank deposit rates, but its payment adoption and Visa's expansion could support demand and offset the pressure
Precedent & Market Context
The growth of stablecoins is closely tied to the interest rates in the banking sector. A recent study by the Bank for International Settlements (BIS) found that a one basis point increase in bank interest rates reduces the growth in market capitalization of stablecoins by about 3% over ten weeks. This decrease would reduce the amount of growth to be approximately 12% annually.
Main Event
USDC faces declining growth due to rising bank deposit rates. According to a recent study by the Bank for International Settlements (BIS), a one basis point increase in bank interest rates reduces the growth in market capitalization of stablecoins by about 3% over ten weeks.
Analysis & Market Impact
USDC shows greater sensitivity to interest rate changes than USDT. This difference highlights USDC's closer ties to U.S. users and institutions. Higher bank yields make deposits more attractive relative to stablecoins. However, the effect remains specific to stablecoins, as researchers found no significant link with other cryptocurrencies.
Implications & Outlook
While bank rates challenge stablecoin demand, Visa's stablecoin expansion highlights growing real-world payment utility. For example, Visa Direct currently allows payment of wages or purchases made using USDC-funded cross-border payouts in more than 180 countries. If Visa continues to expand its service to include more countries and/or additional banks, it appears possible that additional demand for stablecoins may develop.
Stablecoins face declining growth due to rising bank deposit rates. Visa's stablecoin expansion could support demand for stablecoins and offset the pressure from rising bank rates.
Inyo Global, Visa
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