Another round of FED rate cut in Q4 is coming... Odds now at 88%
- Rate cut = cheaper money
- And cheaper money always looks for yield
Means a perfect setup for stablecoin protocols offering yield. 👀
My thesis on $ENA $XPL $STBL and their flywheel. A Thread: 🧵👇
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In September, the Fed started its rate cut cycle of 2025.
And now, the market is expecting more rate cuts.
The reason is very simple: weak labor market and moderate inflation.
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We already saw a run in stablecoin protocols during Q3, but that was just the beginning imo..
The next leg up will happen in Q4, and it'll be much bigger.
So let's start with best stablecoin protocols:
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1) @ethena_labs $ENA
Last time I mentioned $ENA, it nearly doubled in a few weeks.
It's the biggest decentralized stablecoin protocol and has a stablecoin USDe with $14.82B in supply.
Last month, USDe also got listed on Binance which will open it to 280M+ global users.
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But why is $ENA so interesting?
Because it has everything that is needed for a big rally.
A strong moat in decentralized stablecoin sector due to T1 exchange listings.
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Consistent buybacks through StablecoinX along with fee-switch coming soon.
And most importantly, a very juicy yield of 10%-12% which most stablecoins don't offer.
Also in USDe case, we know where the yield is coming from
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Now apart of these 3 factors, there's one more thing which will cause USDe supply to go up.
No value accrual for USDC and USDT holders by Circle and Tether.
These companies make billions in revenue, and yet gives nothing to the holders.
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And they will never do it due to GENIUS Act which prohibit such things.
This is why with more rate cuts, liquidity will move out of bonds into crypto and stablecoins.
As this happens, USDe supply and revenue will go up which will lead to $ENA buybacks.
I guess Web3 guys call it "Flywheel".
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2) @Plasma ( $XPL )
Layer-1 built for stablecoins.
It allows zero-fee USDT transfers with near instant and institutional-grade security.
Launched last week and immediately hit all T-1 exchanges.
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Why I'm paying attention to $XPL?
Despite several FUD around XPL team selling, I still think it's a good play in Q4.
First of all, it's backed by Bitfinex, Tether CEO and Peter Theil.
This seems like a side project of Tether which has $500B valuation.
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Additionally, the competitor for XPL is $TRX which is mostly used for stablecoin transactions.
With Plasma, you can send USDT with zero-fee which makes it attractive.
Also, Plasma sets the benchmark for global neobank, but natively for stablecoins.
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- Earn 10%+ yield and pay directly from your stablecoin balance
- Instant global payments with zero fees
- Privacy enabled transactions
The biggest Neobank is Paypal with $80B valuation, and maybe $XPL could reach that.
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But am I going heavy now?
I think $XPL could follow the $PUMP playbook.
Almost every new buyer is underwater now, and XPL is still going down despite bullish market.
Maybe it could reach around $0.6-$0.65 before a bottom formation and reversal.
Also, most of the selling pressure is over and team unlocks will happen next year.
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3) @stbl_official ( $STBL)
RWA-backed stablecoin protocol on BNB Chain.
Co-founded by Tether's former CEO and is backed by Wave Digital.
Big things are lined up for Uptober.
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Why I'm paying attention to it?
This month, USST and YLD minting with start.
Franklin Templeton has already committed to mint $100M in USST.
Also, $STBL multifactor staking will go live this month.
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The team has also announced upto $1M in monthly buybacks from Q4.
Nearly $200M in tokens will be unlocked but just 5% of that will enter the circulation.
With buybacks going on, there'll be little to no impact on token circulation supply in Q4.
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Am I buying now?
Right now, the markets are focused on privacy and perp DEXes.
This means stablecoin protocols could show some correction as liquidity will flow out of them into new plays.
I'm paying close attention to $STBL improvements, and will add it to my bags accordingly.
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Also, there are some FUD around STBL team selling similar to XPL, which could give me a better entry.
IMO, there won't be one single winner of a "trillion dollar narrative", so $STBL might cook due to good backing and low-float.
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4) @USDai_Official (No token yet)
Synthetic dollar protocol designed to finance the physical infrastructure of AI and other emerging sectors.
It has a market cap of $530M and currently available only on DEXes.
YZI Labs, Dragofly etc. are backing USDai and it has raised $17.4 million.
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How does it work?
protocol revolves around three key participants:
Depositors.. earn yield on their USDC/USDT deposits by minting USDai and staking into sUSDai.
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Borrowers.. typically non-hyperscaler infrastructure operators in need of hardware financing
Curators, provide the first-loss capital, earn associated premiums, and help separate the capital from the operator through tokenization.
has already allocated 30% of its supply for airdrop, which is huge.
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Conclusion:
I think Q4 is going to be very bullish for alts and we can already watching some signs.
Trump is hinting towards stimulus checks, Treasury is set to inject liquidity while Fed is cutting rates.
All this will make a bullish setup for alts and "stablecoin narrative" will boom during this.
Just don't go full degen mode, otherwise you'll most likely get rekt..
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