Bitcoin has rallied from its recent lows with stock markets as US Senators passed a stablecoin bill.
The price of BTC has bounced from sharp lows at the 100k level and now has its levels set for support and resistance with the $110k level being important going forward.
The potential for stablecoins to create demand for short-term US Treasury securities is currently on traders’ minds, with investors expecting these digital tokens to absorb a huge supply of government debt later in the year.
Stablecoins are pegged to highly liquid assets such as the US dollar and investors believe that the tokens can drive demand for US Treasuries by requiring issuers to hold large, liquid, and safe reserves to support a 1:1 peg to the greenback.
“Stablecoins are drawing significant…demand for the Treasury market,” said Yie-Hsin Hung, CEO of State Street Global Advisors, in keynote speech this week.
She said that 80% of the stablecoin market is invested in either Treasury bills, or repos, which is currently around $200 billion, or only 2% of the overall Treasury market.
“But stablecoins are growing fast, and most likely, will outpace the growth of Treasury supply,” Hung said.
That relies on a strong cryptocurrency market as times of crypto bearishness have led to fractures in stablecoins in the past.
Given expectations of a looming Treasury supply of as much as $1 trillion by the end of the year, the market is looking for buyers that could be a source of new demand for US government debt, according to Hung.
US Senators passed their Genius Act, aimed at regulating the hot stablecoin sector and that could be a green light for further investment flows that could support the BTC price.
