We’re about to find out if the crypto market is big enough to raise the price of U.S. bonds and the dollar
- President Trump’s GENIUS Act legalizes stablecoins and requires them to be backed by U.S. dollars or Treasuries. That’s going to increase demand for dollar-backed assets and, maybe, cement the dollar’s reserve currency status. Bitcoin and Ether have both risen as a result, alongside a modest recovery in the U.S. dollar.
Bitcoin is up. Ether is up. And the dollar is up—a little. These things might be related if you believe, as many in the cryptocurrency world do, that the Trump Administration’s regulatory support for crypto will revolutionize digital payments.
Bitcoin was up 1.27% this morning at just under $119K per coin. ETH rose sharply by nearly 12% over the last five days. These gains came as President Trump signed the GENIUS Act, which legalizes stablecoins. Stablecoins are cryptocurrencies that maintain their value at 1:1 with fiat currency, usually the U.S. dollar.
The GENIUS Act specifically requires that stablecoins in the U.S. be backed by dollars or U.S. Treasuries. That will lock in demand for dollars and short-term U.S. bonds from stablecoin issuers, and that in turn will support both the dollar and the price of bonds.
Lo and behold, the U.S. dollar, which had been down by 10.8% year-to-date at the beginning of the month, has picked itself up and is now down only 9.39%.
The act “formalizes stablecoin issuers’ role as quasi money market funds, supporting US short-term debt markets and channeling non-USD liquidity into dollars,” Deutsche Bank analysts Marion Laboure and Camilla Siazon told clients in a note seen by Fortune. “At a time when US dollar hegemony is under question, this has been seen as a win by the Trump administration. On Friday, Trump affirmed that the GENIUS Act would ‘secure the dollar’s status as the world reserve currency,’ and followed that if the US were to lose its reserve status, it would be akin to the US ‘losing a world war.’”
It’s not yet clear whether the crypto market is big enough to push up the price of the dollar. But it might be, Laboure and Siazon say. “Tether alone holds over ~$120bn in treasury bills as of Q1 2025 and ranks amongst the top holders of US treasuries.”
“The US treasury predicts that T-bills held by stablecoin issuers (excluding interest-bearing stablecoins) will grow to ~$1trn by 2028,” they said.
The act also bans stablecoin issuers from offering “yield” to holders. (In cryptoworld, yield is a stream of payments that looks a lot like interest given to anyone who offers their crypto holdings as a loan to borrowers on a crypto exchange.) Because stablecoins will not be able to offer payments to holders, it looks as if crypto investors are piling into ETH, which has long offered yield payments to anyone willing to “stake” their coins as a security on the Etherium blockchain. (Staking involves punishing anyone who approves a false transaction on the blockchain but rewarding anyone with new ETH if they approve a true transaction.)
“This perhaps explains why we are also seeing a rise in Ether (+25%) last week, as expectations for diminished stablecoin yields are driving interest towards Ethereum as the primary alternative for yield generation in decentralized finance,” the pair said.
Here’s a snapshot of the action prior to the opening bell in New York:
- S&P 500 futures were up 0.24% this morning. The index closed flat at 6,296.79 on Friday.
- China’s SSE Composite was up 0.72%.
- The STOXX Europe 600 was down 0.17% in early trading.
- The UK FTSE 100 was down 0.18% in early trading.
- The Nikkei 225 was down 0.21%.
- Bitcoin was up 1.27%, at just under $119K.
This story was originally featured on Fortune.com