Are stablecoins a leading indicator for major rallies?

Plus, will crypto ever move on from Tether?

article-image

Furkan Cubuk/Shutterstock modified by Blockworks

share


Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. Subscribe to the Empire newsletter.


Old dogs, new tricks

Step aside, boys, there’s a new venture fund in town. 

VanEck Ventures was officially announced last week. It’s a $30 million early-stage fund, which is meant to be a “fintech vehicle very much at the center of crypto and AI,” general partner Wyatt Lonergan told me. 

“Those two components are very much like horizontal technologies. And I say that because crypto is like the value layer and AI is where you can now take financial services that are typically performed by people, represent them in code and start to automate things,” he said. 

Lonergan teased that the fund’s made a couple of investments so far, but VanEck isn’t quite ready to divulge any deets just yet. Sad. What we do know is that they plan to make up to 35 investments, and the checks can range from $500,000 to $1 million. 

The goal is to focus on early-stage (pre-seed and seed), but Lonergan’s not looking to completely shut the door on participating in a Series A if the right project comes around. 

“We need to be opportunistic. If we see something that we missed because we weren’t around a year ago, they’re raising enough ground and it’s attractive — we’ll look at it. But we are always price-sensitive. When you have a small fund, you have a concentrated fund structure, the idea is that any one investment could return the fund multiple times. That’s very important,” he said.

Both Lonergan and his partner Juan Lopez came from Circle Ventures. Lonergan helped launch Circle Ventures back in 2021 before he left for VanEck. 

The fund will still have a keen interest in stablecoins, which shouldn’t be a huge surprise given Lonergan’s past and VanEck’s own interest. While the firm itself doesn’t have a stablecoin, it invested in the stablecoin firm Agora, which is helmed by Nick Van Eck, the son of VanEck CEO Jan Van Eck.

But it’s not just personal interests that pique both Lonergan and the 69-year-old investment management firm.

At the “core,” Lonergan said, “are stablecoins and … within that, we kind of believe the underlying blockchains are more or less being commoditized to a point that there’s enough great technology out there. That’s best exemplified by [the fact that] you can go onto any crypto wallet or Coinbase today and upload dollars for free, send it across the world.”

Lonergan’s tone came off as bullish, given his belief that stablecoins, in particular, could see regulatory clarity in the next two years. Building upon the regulation that could be coming “very soon,” the thought is that legal stablecoins could draw in fintech firms.

As always, there’s a bit of a catch. Lonergan reasoned that the door opening for fintechs to use stablecoins won’t be a very obvious crypto use case. Basically, it wouldn’t be surprising if the crypto connections weren’t wildly obvious to those adopting stablecoins.

“It won’t be this crypto thing. If you’re not investing in this category, [and] it could be a weird tagline, but I think it could be that kind of ChatGPT moment for crypto, because [stablecoins] are the one technology that businesses will consume at scale, right? AI was not apparent until you had chat,” Lonergan said.

If we’re looking at the most popular use cases for crypto at this moment, he may very well be on to something. Polymarket, when mentioned in non-crypto media, isn’t flaunted as “crypto,” though we know it is.

For now, perhaps flying a little under the radar might be the best thing for potential killer apps.

— Katherine Ross

Data Center

  • BTC and ETH are taking it easy after yesterday’s push, now up 1% and 2% apiece in the past day. (BTC: $65,500; ETH: 2,600.)
  • HNT has given up most of its gains made in the past two months, having fallen nearly 30% from its six-month peak in September.
  • Sui leads Base and Solana for weekly DEX volume growth, up 41.6% to $227.9 million.
  • Base and Solana have otherwise grown 20% and 14.6% week-on-week, processing $1.1 billion and $1.76 billion, respectively.
  • Avalanche has gained about $100 million in stablecoins in the past seven days, rising 4.5% — the most of any chain with $350 million supplies or more.

A stable indicator

Rising stablecoin supplies are sometimes viewed as bullish indicators for individual coins.

More stablecoins on a network imply increased onchain activity, leading to more value accrual for the native token, and, eventually, converting to higher prices.

But how true is it?

After mapping stablecoin supplies against token performance for most of the top blockchains, I’m not entirely sold.

Ten out of the top 16 blockchains by stablecoin supplies — which includes any network with $250 million or more native supplies right now — indeed showed a fairly clear correlation between the amount of stablecoins minted onchain and token prices.

In almost every case, though, it was token prices that shot first, often weeks or months in advance, before stablecoin supplies started really taking off.

Price has led stablecoin growth in most cases

SOL, for instance, began rallying hard at the end of last September, as bitcoin was heating up for an ETF-hype-fueled bull run. 

Solana’s stablecoin supplies, as shown by the purple-shaded area in the background above, had been stagnant for six months, at around $1.5 billion, leading up to that rally. 

It wasn’t until December that Solana’s stablecoin supplies rose in any meaningful way, during which time SOL had rallied over 300%. NEAR showed an almost identical lag.

Similar patterns can be seen in aptos, toncoin, near, avalanche and, to a lesser degree, ether, although prices and stablecoin supplies decoupled during recent consolidation for the former two.

SUI has showed tight correlation while APT has lagged behind Aptos’ stablecoin supplies

Stablecoin supplies on Ethereum layer-2s also rose massively well after their own price rallies, but that correlation has also died off for now. 

The extent to which L2 activity accrues to their base assets — let alone ETH — is however an ongoing debate, so it’s probably better to focus only on layer-1s.

In any case, there were exceptions: BNB, MATIC, FTM and CELO didn’t really show a clear correlation either way. Token prices stayed flat while stablecoins increased, or prices went up despite stablecoin supplies hardly budging or even shrinking.

The price of bitcoin jumped in Q4 2023 — bringing stablecoin supplies along with it

And besides, bitcoin itself front-ran the current rally in global stablecoin supplies. But the amount of stablecoins in the crypto ecosystem has gone up during bitcoin’s sideways action, which has now persisted since March.

The real question is then: Are stablecoins front-running the next bitcoin rally? Who knows, but that would certainly align with calls for bulls to take control for the next eight-to-10 months. 

— David Canellis

The Works

  • As part of its multibillion-dollar settlement, TD Bank failed to disclose ‘suspicious’ transactions related to crypto. 
  • The man who accidentally dumped a hard drive with 8,000 bitcoin (worth $522 million) is now suing his local city council to let him search for the missing BTC.
  • Coinbase’s Base has stolen Arbitrum’s title of the largest rollup by total value locked. 
  • TD Cowen thinks that the draft stablecoin legislation from Sen. Bill Hagerty could shape the regulatory framework for stablecoins.
  • Tether’s considering potentially lending billions to commodities traders, Bloomberg reported.

The Riff

Q: Will crypto ever move on from Tether?

Pockets of the space will probably adopt alternatives. 

Yield-bearing stablecoins could become the default asset for some DeFi apps, or even wallets, leading to increased usage.

I’d be on the lookout for these kinds of partnerships moving forward, especially for newer layer-1 networks still building out their LEGO infrastructure.

Failing a doomsday scenario involving police intervention or other such drastic regulatory action against Tether and its executives, it would take a catastrophic failure of the firm’s own doing to unravel at this point. 

Realistically, the only thing that has ever mattered to the market is whether Tether can redeem their tokens for real dollars. And despite all the oddities in Tether’s history, there’s been no publicly disclosed instance of failing to process those requests.

Whether crypto is prepared for that possibility, say by ensuring there’s infrastructure in place to support sudden mass exodus from USDT into alternatives, is another story altogether. 

From a risk management perspective, it could be wise. More likely, though, is that crypto would be reactive to such a situation than proactive.

— David Canellis

Crypto in general? Probably not. It’s too baked in. 

But will we see a bit of a shift in power dynamics due to the regulatory environment? I’m leaning toward yes at this stage. 

Look, if Tether isn’t able to operate in the EU and if the US were to ever follow in similar tracks, then that does make USDC the go-to when it comes to major players in those two environments. 

But outside of the US and EU, I think Tether will maintain its dominance. It’s solving one of the biggest issues that crypto wanted to take care of: allowing access to something like a dollar digitally (that’s the easiest, most crass way to put it though we could argue that it’s not entirely true). 

It’s not really a sexy use case, but it’s a damn good one. 

If we were to turn all of this on its head and say that Tether is suddenly MiCA compliant and fully accepted by the US government, then I think the crown is practically soldered on its head, and Tether will reign over the other offerings. 

As usual, I’m left with a desire to grab some popcorn and watch this play out.

— Katherine Ross


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

LTIPPanalysis.png

Research

This report is a retroactive analysis of Arbitrum's Long Term Incentives Pilot Program (LTIPP). We collect relevant data at a protocol level and review bi-weekly updates to analyze recipients, their strategies, and the impact of the incentives on high level growth metrics. In particular, we want to highlight outperformers and underperformers, and glean any best practices or lessons learned for protocols distributing ARB incentives in the future. The overarching goal is to synthesize lessons learned that the DAO can reference as it begins thinking about future incentives programs–namely, the working group for incentives that is being actively discussed–especially as Timeboost introduces new conditions for trading and economic activity.

article-image

Ledn’s John Glover gives some price targets to watch for bitcoin

article-image

Sponsored

AI project Zerebro intersects the spheres of artificial intelligence, finance, art, music, and culture

article-image

Allmight is focused on furthering the United States’ leadership in crypto

article-image

The conditions Charles Schwab is waiting for before jumping headfirst into crypto could take shape soon

article-image

The FCA’s director of payments and digital assets shared some takeaways from chats with crypto companies and law firms

article-image

Let’s take a look at how US equities typically perform this time of year and what we might see in the coming days