Genius Act: Savior of the Market, or the Grim Reaper for Altcoins?

The hottest topic in the crypto market right now is the Stablecoin Regulation Bill, also known as the Genius Act. If passed, it would require all stablecoins to be backed by U.S. Treasury bills (T-bills). This is not just a regulatory move—it’s a strategic maneuver by the U.S. to transform the crypto market into a new source of demand for an already weakened U.S. bond market.

Investor expectations are rising. The stock price of Circle, the issuer of USDC, has surged more than sevenfold in just a few days. Many crypto investors are hopeful: if the Genius Act passes, inflows will explode and altcoins will soar.But from our perspective, the opposite may happen. The Genius Act may actually become the Grim Reaper for altcoins.

■ The Core of the Genius Act: Not Regulation, but Digital Sovereign Debt

At its heart, the Genius Act isn't just about regulating stablecoins—it's about turning them into digitized U.S. government bonds. By requiring stablecoins to be backed by short-term Treasuries, the U.S. creates a system in which increased crypto activity leads to increased T-bill purchases, lowering short-term interest rates and eventually helping stabilize long-term yields.

It’s a clever structure. More crypto demand → more stablecoins issued → more Treasury purchases → lower yields.

But what if the market moves in reverse?

■ When Crypto Falls, the Bond Market Could Be at Risk

Stablecoins are essentially liquidity pools for crypto trading. As crypto prices rise, stablecoin supply expands—boosting T-bill purchases and easing bond market pressure. But if crypto crashes, the reverse occurs.

In the event of a sharp market decline, stablecoin issuers may need to sell their Treasury holdings to meet redemptions, potentially triggering a bond market liquidity crisis. A routine drawdown may be manageable, but a full-scale crypto meltdown? That could resemble a bond market bank run.

That’s why the U.S. must not only regulate stablecoins but also stabilize the entire crypto ecosystem. And at the heart of that instability lies altcoins.

■ Altcoins: Too Volatile for America’s Financial Core

Altcoins routinely fluctuate 30–50%, and 90% drawdowns are not uncommon.Would the U.S. government allow such assets to be directly or indirectly linked to its sovereign bond infrastructure? Highly unlikely.

The volatility of altcoins is a systemic risk, and the U.S. will be compelled to clean them up.That means fundamentally sound altcoins will be absorbed into ETFs, while others will be left behind—isolated from capital flows and eventually phased out.

■ ETF Inclusion Will Define Survival

Only altcoins that meet regulatory, structural, and governance standards will survive.Solana, XRP, Avalanche, and Chainlink are already being mentioned as ETF candidates, but that’s no guarantee.Even inclusion in discussions does not ensure long-term survival, as the filtering process will be long and rigorous.

The U.S. will likely proceed in phases:

1. Approve select altcoin ETFs to channel bond demand;

2. Then begin regulatory discussions about removing unqualified coins from the ecosystem.

3. 
   

■ Conclusion: Bitcoin’s Dominance Will Strengthen

In the short term, altcoin investments may track market momentum. But over time, the environment will become more hostile. In a digital financial system built to support U.S. fiscal stability, unregulated, high-volatility altcoins face existential risks.

As a result, capital is likely to flow increasingly toward Bitcoin, the most structurally sound and policy-aligned digital asset.Bitcoin’s dominance will grow, stablecoins will become digital gateways to U.S. debt, and altcoins will be divided between ETF survivors and regulatory casualties.

And the starting point of that shift?The passage of the Genius Act.