A Coin Metrics study has revealed that the types of demand weighing on USDC and Tether will lead the former to grow more slowly and the latter more quickly.
A Coin Metrics study has analyzed how the types of demand weighing on USD Coin and Tether (USDT) will lead the former to grow more slowly and the latter more quickly, according to Liam “Akiba” Wright of CryptoSlate.
It also finds a relationship between lending yields and USDC. These differences matter because a new dollar token can serve a borrower, a lender, or someone holding their assets in dollars before it becomes a Bitcoin transaction.
The aggregate supply of stablecoins measures the tokens in circulation. These new findings give Bitcoin investors a reason to analyze the behavior of these balances before interpreting issuance as new spot buying demand.
What do the USDC and USDT regressions show?
The opposing return relationships demonstrate the importance of issuer composition. The Coin Metrics study uses weekly observations over four years, analyzing six drivers from the previous week in relation to subsequent supply growth. Higher perpetual futures funding rates are associated with faster growth for both issuers, explaining approximately 10% of the weekly variation in USDC supply growth and 4% of that in USDT after controls.
A separate analysis, starting in 2023, uses the difference between the annual percentage yield (APY) of the Aave v3 lending protocol and the yield on a three-month Treasury bill. This carry-trade spread provides significant explanatory information for USDC, but no meaningful improvement for USDT or combined supply beyond funding rates.
Lagged issuer models explain approximately 13% of weekly fluctuations in USDC supply growth and 16% of those in USDT. None of the models in the study explains more than 25%, leaving most of the movement unexplained. These historical associations do not establish causality or allow future Bitcoin returns to be assessed.
A positive relationship for one issuer and a negative one for another can coexist within the same total.
