HOW STABLECOINS PROFIT FROM U.S. DEBT & INTEREST RATES

Summary from the TLDR Crypto newsletter

Stablecoins like USDT and USDC generate revenue by investing their dollar-backed reserves in interest-bearing instruments like US treasuries, making their profitability highly sensitive to interest rates. Algorithmic and delta-neutral models like USDe derive income from crypto-native mechanisms like funding-rate arbitrage and staking, which show weaker correlation to traditional rate cycles. In a 0% interest scenario, treasury-backed assets face severe revenue compression unless they diversify into alternative assets or products, whereas algorithmic protocols could maintain or boost yields through increased market leverage.