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Stablecoins, the Beating Heart of Crypto Markets

Stablecoin

Written by Adam Morgan McCarthy , Thomas Probst

11/11/2025

    Stablecoins have been everywhere in 2025, and show no signs of slowing down. Each week, more firms join the stablecoin race, and not just crypto natives. Traditional wire transfer giant Western Union was the latest to announce a stablecoin project last month, following other financial service firms such as Stripe and Fiserv.

    As the pegged assets see increased attention, we break down how they’re used in crypto markets, from trading and beyond, into DeFi.

    Stablecoins, the Beating Heart of Crypto Markets
    by Adam Morgan McCarthy AND thOMAS PROBST

    In crypto stablecoins are more than just trading vehicles, they’re at the heart of the market. They’re also highly profitable for their issuers, and this raises concerns for some, and brings into question the “stable” nature of the assets.

    Due to high interest rates in the U.S., and the fact that most issuers hold short-term Treasuries as backing for their stablecoins, issuers outperform most bulge-bracket banks. Tether expects to earn around $15bn this year, mostly due to interest earned from holdings used to back its USDT stablecoin.

    However, there are several problems with this model. Namely, rates are falling, and while there’s new question marks over a December rate cut, it’s inevitable that at some point in the future rates will come down. They’ve already fallen from their peak in 2023/2024, and we’ll likely see that gap widen in the coming months, regardless of individual governor’s comments.

    Secondly, the practice of earning a yield on a pegged asset raises difficult regulatory questions. Put it simply, if it’s intermittently generating a yield, it’s not stable in value, it’s a fixed income product.

    The fixed income comparisons become even harder to deny when you look at the rise of on-chain money market funds. We explore this in more detail in the full report.

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    Data Used In This Analysis

    Our industry-leading crypto research is the direct result of combining our proprietary data with world-class in-house experts. Bringing the very best of Kaiko’s people and crypto data together, we unlock the unique insights that form the basis for our discoveries and analysis. We believe in doing so, our data speaks for itself, helping both our clients and the wider industry get a better understanding of the crypto ecosystem, and the evolving trends and patterns in motion at a regional and global scale.

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