Founder Letter No. 005 | The Stablecoin Thesis

Just My Thoughts

THE STABLECOIN THESIS

A Black Covenant Studios Publication

I think a lot of people are still looking at this crypto shit wrong.

Everybody watches Bitcoin. We know XRP. Litecoin. Everybody got their favorite coin. Everybody got their favorite meme coin—Dogecoin, PEPE, whatever. And I get all of that.

But I'm starting to look at crypto through a completely different lens.

I'm already 100% behind what's happening with AI. Now I'm starting to believe crypto is going through its own transition—from something we mostly trade into infrastructure the financial system may actually use.

And I think stablecoins could be one of the biggest pieces of that transition.

A few months ago I kept hearing people talk about stablecoins like they were boring.

It ain't gonna 10X. It ain't gonna 100X.

Well… it's not supposed to.

Take USDC.

USDC is basically a digital version of a dollar. One USDC is designed to stay worth one dollar.

So don't think of USDC like Dogecoin.

Think of USDC like the dollar learning how to use the internet.

And when I say blockchain, don't make this shit complicated. Think of it like a digital record book shared across a network of computers. Transactions get recorded there, and money can move without everything having to stay locked inside one bank's computer system.

That's enough blockchain for today. Follow me.

I put this in text on purpose too.

We've trained our minds to swipe through one-minute videos and forget half of what we just watched. Sometimes you need to slow down, read the words and actually sit with the idea. If you're still reading, this was probably meant for you anyway.

The part I'm interested in isn't USDC itself going up in price.

I'm watching everything being built around that digital dollar.

Because if hundreds of billions—and eventually maybe trillions—of dollars move through stablecoins, somebody has to build the highway.

Somebody has to create the stablecoin.

Somebody has to hold the real money and safe assets behind it. In regular bank terms, if they give you a digital dollar, they need real reserves so that dollar can be redeemed.

Somebody has to provide the apps and exchanges where regular people and institutions can buy it, hold it and move it.

Somebody has to provide custody. That simply means keeping the assets and the keys safe.

And somebody has to build the lending system so those digital dollars don't just sit there—they can be borrowed, lent and put to work.

That's why I'm watching Circle, Coinbase, Robinhood, Morpho and Aave.

Circle issues USDC.

Coinbase and Robinhood help bring regular users and institutions onto these financial rails.

Morpho and Aave help build the onchain lending markets.

Here's what made this click for me: this shit is already happening.

Eligible Coinbase users can lend USDC through vaults powered by Morpho. Borrowers put up collateral, borrow against it and pay interest. Robinhood has also built an Earn experience where users can lend USDG through Morpho using a self-custody wallet.

That doesn't make it risk-free. It is not a bank savings account, it isn't FDIC insured, and smart contracts can fail. But it proves the infrastructure is not some 2035 whiteboard idea.

Parts of it are already running.

NOW HERE'S WHERE MY THESIS REALLY STARTS COOKING.

America has a lot of debt.

I'm not turning this into a full lesson about the national debt because that's another My Thoughts by itself. If y'all want me to break that down, tell me.

But understand this: America constantly needs people and institutions to buy Treasury debt.

Think of a Treasury like the government selling an IOU.

You give the government money. The government promises to pay you interest and give your money back when that IOU matures.

Some mature in weeks or months. Some take years. Some take 10, 20 or 30 years.

The government keeps issuing and refinancing massive amounts of these IOUs, so the debt constantly needs buyers.

Now connect that back to stablecoins.

If I give Circle one dollar and they issue me one USDC, Circle needs something safe and liquid behind that digital dollar.

A major part of those reserves can sit in cash, short-term U.S. Treasuries and overnight Treasury repurchase agreements.

That's the connection I don't think enough people are making.

More stablecoins.

More reserves required.

Potentially more demand for short-term Treasury assets.

So crypto doesn't necessarily have to destroy the dollar.

Crypto could actually extend the dollar.

America gets another global digital rail for dollars. Stablecoin issuers get safe assets to back those dollars. Treasury gets another potential source of demand for short-term government debt. And crypto gets connected deeper into the traditional financial system.

When I say the dollar becomes programmable, I don't mean Star Trek. I mean money can be built into software. Payments, transfers, lending and settlement can happen automatically under rules written into the system—and they can operate around the clock.

That's financial infrastructure.

And I need to correct one part of my own thinking too.

Treasury buying back some older long-term bonds does not mean America is simply getting rid of every 30-year bond and replacing it with short-term bills. That's too strong.

My actual bet is simpler: stablecoin growth could create another major buyer base for short-duration Treasury assets.

That's why SGOV fits inside my research too.

SGOV is not crypto. It's an ETF that holds U.S. Treasury securities with three months or less left until maturity.

I'm not buying SGOV because I expect it to 10X or because stablecoin demand is supposed to make the share price explode. That's not what it does.

I'm looking at it as the short-term Treasury side of the same financial plumbing—a place to hold part of my money and collect short-term Treasury income while I study the rest of the system.

So when I'm building my infrastructure basket, I'm looking at different pieces of the machine.

USDC—the digital dollar.

Circle—the issuer.

Coinbase and Robinhood—distribution and access.

Morpho and Aave—the lending infrastructure.

SGOV and short-term Treasuries—the traditional assets sitting underneath part of the stablecoin economy.

And there will be other pieces.

I'm not telling anybody what to buy, sell, hold or trade. I'm definitely not saying go buy everything I just named. These things carry completely different levels of risk.

I'm documenting what I'm seeing, what I'm researching and where I'm putting some of my own attention and money.

I could be completely wrong.

But I think we're watching pieces of a new financial system being built right in front of us.

AI is changing what computers can do.

Crypto may be changing how money moves.

And instead of spending all my time trying to guess which coin pumps next…

I'm trying to figure out who owns the pipes, who builds the roads, who collects the tolls—and where all that money has to sit when it gets there.

Those are my thoughts.

BLACK COVENANT STUDIOS

MY THOUGHTS

Documenting the journey while I'm still living it.