The harsh truth of the crypto market in 2025 is: you think bull and bear markets are driven by emotions, but often it's about the shifting of funding channels. The 'epic' entry in October is a typical example — Reuters reported that global crypto-related ETFs recorded a record net inflow (in the tens of billions) for the week ending October 4, 2025, accompanied by Bitcoin hitting historical highs, with the narrative shifting from 'retail frenzy' to 'institutional allocation'.
When institutional money comes in, it will trigger two chain reactions:
1. Prices resemble macro assets more — volatility may not necessarily be smaller, but the rhythm is more like 'driven by liquidity';
2. On-chain is more like a 'settlement layer'—stablecoins are no longer just trading pairs; they will become the base demand for clearing, leverage, and hedging.
At this point, looking at USDD (Decentralized USD), its significance is not just 'another stablecoin,' but rather a question: when the chain becomes a settlement venue for both institutions and retail investors, what form of the dollar would you choose to keep on-chain?
One type is the 'dollar within the compliance fence': strong credit, strong entry, strong controllable;
Another type is the 'dollar within the protocol': strong verifiable, strong composability, strong sovereignty.
The core narrative of USDD 2.0 is to shift the dollar from 'issuer credit' more towards 'on-chain asset credit.' Public documents mention its transition from the old model to over-collateralization and PSM, emphasizing multi-chain native deployment to integrate into a broader DeFi ecosystem.
And when ETFs make 'buying tokens' extremely simple, competition on the chain will instead polarize in two directions:
One end is compliant financial products: you can hold exposure with a click in a brokerage;
The other end is on-chain native finance: you mint, swap, collateralize, and borrow within contracts, gaining composable financial capabilities.
The battlefield for USDD clearly belongs to the latter—it is not competing with ETFs for 'positions,' but rather accommodating the 'incremental on-chain activity' brought by ETFs: more arbitrage, more hedging, and more fund management needs based on stablecoins.
But don't rush to write it as a myth. One of the side effects of institutionalization is that extreme market conditions are more likely to trigger 'de-leveraging waterfalls.' At this time, stablecoins face not a 'reputation crisis,' but a 'liquidity stress test': Is the collateral ratio sufficient? Is the liquidation path smooth? Can PSM withstand instantaneous redemption demands? Public documents indicate that the USDD collateral ratio has been maintained at a high range for a long time and has reduced single-point risks through diversified collateral.
So my conclusion about USDD is very pragmatic: the success of ETFs is not the endpoint of stablecoins, but rather the end of the first half for stablecoins. The decisive factor in the second half is—who can ensure that on-chain dollars can not only survive but also be widely used in an era where 'institutional funds alter volatility structures.'
If USDD can continue to solidify 'verifiable solvency' and 'available on-chain liquidity,' it will not face competition from a particular token, but rather a larger proposition: Does the chain need a base currency that is closer to 'self-custodied dollars'?
The opportunity for USDD, on the contrary, comes from institutional money: the larger the money, the more it needs a settlement layer; the more it needs a settlement layer, the more it requires stablecoins; and the more it needs stablecoins, the more it will revisit the question of 'who will control the dollar.'
Disclaimer: The above content is the personal research and views of 'carving a boat to seek a sword,' intended for information sharing only and does not constitute any investment or trading advice.
