Interesting to see how people think.
In this complicated world we live in there are a lot more ways to be wrong than to get it right. Being correct about something can be akin to threading a needle while the void around that pinhole is a vast sea of inaccuracy. The human mind is susceptible to many fallacies, some of which happen naturally and others which are purposefully studied and exploited within the marketing machine: be it actual propaganda or a commercial for Corn Pops.
In crypto the biggest fallacy is certainly arbitrary unit-bias. It is absolutely pervasive and ubiquitous. I can't tell you how many times I've seen the claim that "Bitcoin is expensive" because owning one Bitcoin is expensive. Who told you it was all or nothing? Who ever said you have to own 1 BTC or nothing? Nobody did, and nobody had to because of cognitive unit-bias. That's just what our brain defaults to when we don't know any better. Tell these same people they can buy 1000 sats for $1 and they'll be like, "Wow that's cheap what crypto is that?" It's Bitcoin, friend. Ya played yourself.
More and more I'm seeing degens looking at the amount of stablecoins in the industry and making similar mistakes. "Wow! Look at all this dry powder just waiting to jump into the alt market!" Not sure if copium or what. While it is true in previous cycles that a spike in USDT was a good omen of things to come (and also a prime target of fake market-manipulation conspiracy) we really have no idea what this type of new money is earmarked for.
The entities creating stablecoins couldn't care less about crypto.
Other than the fact that a rising crypto market cap might increase demand for their stablecoin, corporate entities that mint the stablecoins aren't exactly in the business of degen gambling themselves. They more play the role of casino bankroll than anything else. Stablecoins have garnered a reputation for providing "free money" to those that issue them.
Just take a look at the big ones like USDT & USDC
The claim is that stablecoins are pegged 1:1 with dollars in a bank, but that's not exactly true, is it? These assets are also allowed to exist as bonds and other low-yield investments. Imagine issuing a stable-coin and getting the degens to use it. Imagine this stable-coin acquires $1B in demand. If you could then collateralize the coin "one to one" with bonds that generate 5% yield then suddenly you're making $50M on money that isn't even yours; you're just the middleman providing a basic service. Not bad.
It's not ridiculous to assume that a lot of these stablecoins popping up are being seeded by the entity that issues them... meaning a lot of the numbers we are seeing have very little chance of entering the degen retail market. But more importantly, how do we even know that the money hasn't already entered the market?
Here's the thing that gets me:
In order to believe that number-go-up for stable-coin market cap is synonymous with "dry powder" waiting to enter the market... you have to make a critically false assumption: that money disappears from the economy when you spend it. Yes, it is true, money disappears from your bank account or wallet when you spend it, but you gave it to someone else; it did not disappear from the economy entirely.
So who's to say that the billion dollars in stable-coins we're looking at wasn't spent on Bitcoin multiple times and has already changed hands through multiple iterations of buying and selling? Right? A billion dollars goes into Bitcoin and now that billion dollars is still owned by the Bitcoiners who sold it. Those Bitcoiners use the tokens to buy back into Bitcoin or alts and now somebody else controls them. It all gets lost in the wash and we have no idea what the current owners intend to do with their wealth.
Certainly it is a good sign that overall demand is high and that users are not cashing out to their bank accounts, as this is the one activity that forces the stable-coin issuer to destroy the asset and convert it into actual dollars. But again if the issuer wants to make it look like they run a successful business they could just as easily find money elsewhere and continue seeding the inflated market cap as if nothing had ever happened. The fact that pegged 1:1 tokens are allowed to exist as anything but dollars in the bank certainly tints the entire industry a bit more opaque.
Bankers hate dollars in the bank.
An ironic statement, but also obvious to anyone who understands fractional reserve banking. The money that sits in the bank isn't doing anything to make the bank money. Why sit on billions of dollars cash when you can turn them into bonds and then leverage those bonds to create home loans and issue credit cards? Now stablecoins are on the docket as well.
Of course this all starts to get very awkward once we realize that the interest owed to banks doesn't exist and there's a largely predictable rate of failure in terms of foreclosure and otherwise bad-debt floating around. It's a cutthroat financial game of hot-potato.
Conclusion
Money does not disappear when we spend it. The person we sent the money to does not light it on fire. It's strange how no one would challenge this obvious truth directly, but given a little latitude combined with economic complexity can path right back to this assumption. Perhaps this is the adult version of peekaboo and object permanence.