Treasury Markets Are Drying Up, But Stablecoin Issuers Say They’re Still Liquid

The allocation of reserves toward short-dated Treasuries has boded well for stablecoin issuers, analyst says

article-image

larry1235/Shutterstock.com modified by Blockworks

share

Though liquidity in the US Treasury market has fallen amid stresses across the banking sector, stablecoin issuers say they are just fine. 

Bid-ask spreads on two-, 10- and 30-year US government bonds jumped to the highest level in at least in six months, Bloomberg reported Tuesday.

A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market, representing the transaction cost.

Data from Quantitative Brokers shows liquidity in the market for 10-year Treasury futures has been less than half the levels recorded before the collapse of Silicon Valley Bank collapse, the Wall Street Journal reported Wednesday. 

But stablecoin issuers are more protected from a decrease of liquidity in Treasury bonds due to their higher allocation of reserves invested in short-dated Treasuries securities, such as Treasury Bills, according to Conor Ryder, research analyst at market data provider Kaiko.

Most top stablecoins work to have an amount of fiat currency or other similarly liquid assets — such as US Treasurys — equal to stablecoins issued. These are generally maintained by third-party partners.

Such entities allocate only a small portion of reserves toward longer-term government bonds, he added.

An accountant report for Circle — published in January by Deloitte — shows the majority of its $32.4 billion bond portfolio is invested in bonds with a maturity date less than three months away, Ryder noted.

Tradfi has been quick to criticize stablecoin issuers in the past, and sometimes rightly so,” he told Blockworks. “But here Circle in particular has shown good liquidity risk management, keeping the majority of reserves in short dated securities that could be sold for minimal loss.” 

A Circle spokesperson did not return a request for comment. 

Meanwhile, a Tether representative said the company holds “a strong, conservative, and liquid portfolio” that includes cash, cash equivalents and US Treasuries with a very short-term duration.

Tether’s stablecoin, USDT, has a market capitalization of roughly $75 billion — behind only bitcoin and ether. 

“We have also developed a set of risk metrics and risk measurement processes, which allows the Tether investment and financial teams to evaluate the risk of the portfolio at any point in time,” the representative added. 

Sebastien Derivaux, MakerDAO’s asset-liability lead, told Blockworks in an email that if there was “a run” on its stablecoin, DAI, it has “ample liquidity in its Peg Stability Module (PSM) — a type of vault that allows users to swap a given collateral type directly for DAI at a fixed rate — to meet initial demand. 

It would then sell its Treasuries to meet redemptions in such a scenario, which he noted would take a few days due to what he called “TradFi slowness.”

MakerDAO is looking to increase its investments in US Treasuries and bonds to $1.25 billion in a proposal made by community member Allan Pedersen earlier this month. 

“The bonds are really short term, so there is no significant price impact due to the fluctuation of rates,” Derivaux said. “In any case, we have a surplus buffer [and] excess capital, covering any shortfall if that should happen during the sales.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 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.

recent research

Research Report Templates (1).png

Research

Aave’s revenues have doubled from April lows and are fast approaching all-time highs. With 35% of borrow interest coming from ETH and 55% from stablecoins, Aave is emerging as a powerful proxy as an ETH and stablecoin beta. As looping strategies accelerate growth and Horizon positions the protocol to ride the RWA wave, Aave is shaping up as one of DeFi’s most compelling multi-narrative plays.

article-image

Private testnet aims to deliver low-cost settlement with partners including Visa, Deutsche Bank, and OpenAI

by Blockworks /
article-image

Solana saw $78 million in REV for August

article-image

Lit Protocol’s Vincent is shifting agentic finance from toy demos to production rails

article-image

The new system aims to unify Europe’s fragmented tokenized asset settlement and cut cross-border costs

by Blockworks /
article-image

Tron slashed fees by 60% as Plasma looms, threatening its USDT moat

article-image

The acquisition adds evaluation-based funding to Kraken Pro, giving traders access to capital on performance

by Blockworks /