The Capital Suck

Software ate the world. Blockchains are sucking in all the capital.

Stablecoin adoption and onchain economic activity now reinforce each other in a loop that has made growth structurally irreversible. The mechanism behind that irreversibility is surprisingly under-appreciated:

Stablecoins move onchain → builders create use cases to capture them → those use cases draw in more stablecoins → the cycle repeats

Each turn pulls in more. Capital that migrates onchain becomes productive, embedded in lending markets, DEXs, and derivatives. Pulling that capital back to legacy infrastructure means forgoing all of that utility. So it stays, and the flywheel compounds.

That loop has already produced an entirely new financial economy with billions of dollars of annual revenue. @CremeDeLaCrypto & I think the same mechanism is beginning to pull all the capital onchain.

Each Turn of the Flywheel Creates Tremendous Economic Value

When $1B of new stablecoins are minted and enter the onchain economy, it disperses into positions across the financial system, gets reused well over a hundred times a year, and generates tens of millions in yearly revenue.

Each $1B of stablecoins generates roughly $122B of annual economic activity, a velocity of approximately 122x.¹ Just to give a sense of the scale, dollars in PayPal turn over roughly 40 times a year.² U.S. M2 velocity, the rate at which dollars circulate in the broad economy, sits at 1.4x. This means that a dollar on a blockchain works roughly **3 times harder than a dollar in @PayPal and 87 times harder than a dollar in M2. **This is because a stablecoin gets recycled through payments, DEXs, lending, etc., in a way that is not possible when capital is trapped in batch-settlement systems with T+1/T+2 clearing.

Here is the breakdown of that $122B of annual stablecoin economic activity produced from $1B in stablecoin supply⁵ (see the first chart in this section):

• Payments & Transfers: ~$68B

• **Derivatives: ** ~$34B

• **DEXs: **~$18B

• Lending: ~$1B

• RWAs: ~$400M

Each $1B of onboarded stablecoins generates approximately $19M in annual protocol revenue,⁴ which funds the next generation of products and attracts the next billion of stablecoins.

It is important to note that the $19M figure is only capturing revenue directly observable onchain from the protocol layer. It excludes the roughly $35M per billion that stablecoin issuers earn annually (assuming a 3.5% risk-free rate), as well as the significant revenue generated further up the stack in wallets, payment processors, on/off-ramps, custody and compliance.

Across the entire onchain economy today, stablecoin issuers earned over $13B from float alone in 2025 (Tether >$10B, Circle $2.7B), and DEXs, lending protocols, derivatives platforms, and blockchains generated over $5B in stablecoin-attributed protocol revenue.³ We covered the economics of some of these businesses in previous articles on stablecoin float and stablecoin fees.

Capital doesn’t leave

Once onchain, capital becomes productive, making the loop self-reinforcing. It gets put to work across lending markets, DEXs, and derivatives. Returning to legacy rails, with their T+1 settlement, banking hours, and siloed ledgers, means forfeiting that utility. So capital tends to stay, and the flywheel compounds.

Stablecoin supply has grown roughly 60x since early 2020, from around $5B to around $300B, and now represents roughly 1.4% of U.S. M2. In 2025 alone, over $120B of new stablecoins were minted, the largest single-year increase ever, and stablecoin transaction volume hit $33T.

Each Turn Gets Bigger

Most of the above was driven by retail capital and crypto-native use cases. The next turns of the flywheel will likely be driven by institutions, and they will be significantly larger.

Institutional capital is beginning to move onchain, and as it does, it is creating an incentive for more asset issuers to tokenize and bring their products onchain to compete for it. @BlackRock’s BUIDL and Apollo’s onchain credit fund are early examples, but they will not be the last. Tokenized RWAs onchain have grown to roughly $25B, up from around $8B less than two years ago. BUIDL alone holds over $2B. The presence of institutional dollars onchain could attract more tokenized treasuries, more private credit vehicles, more structured products, because issuers go where the capital is. And as more products come onchain, they give more institutions a reason to move more capital.

Today, RWAs are the smallest allocation in the stack and one of the smallest revenue lines. But they are one of the fastest growing categories, and the one that connects the onchain economy to the multi-trillion-dollar institutional capital markets. The infrastructure that the retail flywheel built over the past five years (e.g., DEXs, lending markets, and payment rails) is increasingly the same infrastructure that institutions are beginning to use.

Derivatives are the case in point. When traditional markets close and risk shifts over a weekend (e.g., from an Iran escalation or commodity shock), volume increasingly moves to onchain perps on platforms like Hyperliquid. Crude, silver, and gold volumes spike precisely when legacy exchanges are dark.

The Great Migration

Stablecoins were the first real-world asset to come onchain. Dollars moved from bank accounts to blockchains, and the flywheel ensured they stayed and compounded. @CremeDeLaCrypto and I believe that what comes next is a great migration of capital from legacy infrastructure to onchain. We are already seeing it: an issuer tokenizes an asset, institutional capital shows up, more issuers tokenize products to compete for that capital, which pulls more capital onchain.

The flywheel that pulled in stablecoins is beginning to pull in equities, credit, treasuries, and structured products. We are in the early innings of that process, and the same quiet flywheel that grew stablecoin supply 60x in 6 years is the mechanism that will suck all assets onchain.

This is why we are excited about founders building around stablecoins & RWAs. As always, our DMs are open.

Thank you @CremeDeLaCrypto for co-authoring this piece with me. If you enjoyed this, check out our previous piece on how the crypto valuation landscape has changed in the face of a deeper understanding of what drives revenue.

Methodology:

¹ Stablecoin 122x = $33T 2025 adjusted volume (Artemis Analytics, cited by Bloomberg and TRM Labs) / $270B avg supply (mean of $230B April 2025 and $310B March 2026 per DefiLlama). The volume figure covers calendar 2025 while the supply average covers the trailing 365 days ending March 2026. If anything this understates velocity: January 2026 alone saw about $10T in stablecoin transfers, suggesting the true trailing 365d volume is well above $33T. Settlement volume also varies by filtering methodology. More conservative filters (Visa/Allium Labs) estimate about $10T in adjusted 2025 transfers. Even at that level, stablecoins turn over about 40x/year, comparable to PayPal and 28x faster than M2 (1.4x).

² PayPal 40x = $1.79T FY2025 TPV (SEC filing) / about $45B customer balances (10-K). Comparison is directional: stablecoin volume includes all onchain transfers; PayPal TPV includes card-funded transactions.

³ $19M per $1B = $5.1B in stablecoin-attributed protocol revenue (Token Terminal, trailing 365 days ending March 2026) divided by $270B average stablecoin supply (DefiLlama, mean of $230B April 2025 and $310B March 2026). We use protocol revenue (what protocols retain) rather than total fees (about $14B), since the majority of fees flow to liquidity providers, depositors and stakers, not protocol treasuries. Revenue is attributed only to stablecoin-related activity: stablecoin-paired DEX trades (about 50% of DEX revenue), stablecoin-margined derivatives (about 87%), stablecoin lending (about 90%), and network fees from stablecoin transfers (about 90% of Tron, which processes the majority of global USDT volume; 15-25% of other chains). Non-stablecoin activity like ETH/BTC swaps, memecoin trading and NFT mints is excluded.

⁴ $5.1B attributed revenue (note ³) / $270B avg supply = $19M per $1B. Excludes issuer float (about $35-42M per $1B) and offchain revenue (wallets, on/off-ramps, custody).

⁵ Estimated from Artemis stablecoin activity data, the Artemis/Castle Island "Stablecoin Payments from the Ground Up" report (Oct 2025), Token Terminal and DefiLlama, scaled to $33T annual volume. "Payments and transfers" = all non-DeFi movement (P2P, B2B, CEX flows, wallet transfers, not just merchant payments). Lending uses origination volume (flow), not outstanding balances (TVL/stock), for consistency with other categories.

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