Fed hike to 3.75%-4% can help stablecoin issuers, squeeze Bitcoin borrowers: analysis
In brief
- Higher rates reward stablecoin issuers but hurt Bitcoin-buying borrowers, argues CryptoSlate's Andjela Radmilac.
- Circle's Q2 filing showed reserve income at 95.2% of revenue, per CryptoSlate.
- Fed raised its target range to 3.75%-4% on Sept. 16, CryptoSlate reported.
- Stablecoin holders may receive none of the reserve income unless product terms grant it.
Why reserve income matters
Circle is the working example in the piece. Its second-quarter filing showed reserve income made up 95.2% of revenue in the three months ended June 30, 2026, as cited by CryptoSlate. The company's reserve returns tracked close to SOFR (the secured overnight financing rate), which left its revenue heavily dependent on how many stablecoins were outstanding and what their backing earned.
That's the split the hike touched. Higher overnight rates can boost returns on short-term stablecoin reserves, the analysis said, while borrowers whose debt tracks those rates can face larger interest bills.
Holders don't automatically share in it. Token holders may receive none of the reserve income unless the product's terms give them a right to it, according to the article.
The math on a hypothetical issuer
Radmilac used hypothetical figures to show how sensitive the model is. An issuer with $10 billion in reserves earning 4% a year would produce $400 million before expenses and partner payments. If the return fell to 3%, income would drop to $300 million, and it'd take about $13.33 billion of reserves to get back to the original amount.
Those numbers aren't about any real company.
Bitcoin has no coupon
Bitcoin holders face a different calculation. Owning the asset directly doesn't produce contractual interest income, the article noted, so higher bond yields give holders a larger promised income to weigh against a return that depends on what another buyer will pay. Companies earning interest on reserves, meanwhile, can collect more cash when investors find speculative assets less appealing.
Which rate? It isn't always the overnight one. Overnight returns and the 10-year Treasury yield can move differently, because the 10-year reflects expectations about future short-term rates plus compensation for holding a longer bond. The New York Fed's term-premium research uses a model to separate those pieces (the extra compensation can't be observed directly), CryptoSlate said.
The analysis also sketched a scenario where long-term financing gets more expensive even as short-term reserve returns decline. It cited the SEC's guide to interest-rate risk in noting that long-term Treasury bonds can lose market value when yields rise.
Frequently asked questions
Why would a Fed rate hike help stablecoin issuers?
Stablecoin issuers like Circle earn interest on the reserves that back their tokens. According to a CryptoSlate analysis, higher overnight rates can boost returns on short-term reserves as assets mature or reset. Circle's Q2 2026 filing showed reserve income made up 95.2% of revenue.
How does a rate hike hurt companies that borrow to buy Bitcoin?
Borrowers whose debt tracks overnight rates can face larger interest bills when those rates rise, the CryptoSlate analysis said. Bitcoin held directly doesn't produce contractual interest income, so the company has to find that money elsewhere.
Do stablecoin holders earn the interest on reserves?
Not necessarily. The CryptoSlate analysis said token holders may receive none of the reserve income unless the product's terms give them a right to it.
