Arthur Hayes: Past, present and future of the stablecoin market

Author: Arthur Hayes, founder of BitMEX; translated by AIMan@Golden Finance

While Circle CEO Jeremy Allaire had to take over the position as requested by Coinbase CEO Brian Armstrong, I hope that for those who trade any “stablecoin”-related products in the open stock market, this post prevents you from rapidly expanding as promoters stuff shit into the ass of those ignorant gamblers. It is based on this opening remark that I will begin to explore the past, present and future of the stablecoin market.

Professional cryptocurrency traders are to some extent unique in the capital markets because they must have an in-depth understanding of how funds flow in the global fiat banking system if they want to survive and develop. Stock investors or forex traders do not need to understand how stocks and/or currencies are settled and transferred. Trading must rely on the services of brokers, and brokers will provide this service silently in the background.

First of all, it is not easy to buy your first bitcoin; it is not clear which option is the best and safest. The first step for most people, at least when I started to get into the cryptocurrency space in 2013, was to buy bitcoin from others via direct bank wire transfer or cash payment. After that, you can gradually transition to trading on exchanges that offer bilateral markets, where you can trade larger amounts of Bitcoin at lower fees. However, depositing your fiat currency on the exchange is not easy. Many exchanges lack solid partnerships with banks or are in a regulatory gray area in their country, which means you cannot send money directly to the exchange. The exchange will come up with some workarounds, such as guiding users to transfer fiat currency directly to local agents that issue cash coupons on the exchange, or setting up an affiliated company that seems to be unrelated to cryptocurrency to obtain an account, and guiding users to transfer funds to the enterprise.

Scammers use this friction to steal fiat currency in various ways. The exchange itself may lie about the whereabouts of funds, and then one day... puff - the website and the fiat currency you earned hard. If fiat currency is transferred into and out of the crypto capital market through a third-party intermediary, these people may abscond with the money at any time.

Because of the risks of transferring fiat currencies in the crypto capital market, traders must understand and trust the cash flow operations of their counterparties in detail. When funds were transferred within the banking systems of Hong Kong, Mainland China and Taiwan, I received a crash course on global payments (I call the region Greater China).

Understanding how capital flows in Greater China will help me understand how business operations of major Chinese and international exchanges (such as Bitfinex). This is crucial because all true cryptocurrency capital market innovations take place in Greater China . This is especially true for stablecoins. Keep reading and you will understand the importance of this. The most successful case of cryptocurrency exchange in the West is Coinbase, which was founded in 2012. However, Coinbase’s innovation is that it establishes and maintains banking relations in one of the most hostile markets to financial innovation—Pax Americana. Otherwise, Coinbase is nothing more than a expensive cryptocurrency brokerage account , and that's all it takes to push its early shareholders toward billionaire status.

The reason I wrote another article about stablecoins is because of the huge success of the Circle IPO. It should be clear that Circle 's valuation has been seriously overvalued, but its price will continue to rise. This listing marks the beginning, not the end of this stablecoin boom. The bubble will burst after a stablecoin issuer went public in the open market (most likely in the United States) that will use financial engineering, leverage and superb acting skills to split tens of billions of dollars of capital from fools. As usual, most people willing to give up their valuable capital don’t understand the history of stablecoins and cryptocurrency payments, why their ecosystems have evolved so much, or what this means for which issuers will succeed or fail. A very appealing and charming figure will take the stage, roaming all kinds of nonsense, waving his (most likely male) hands, and explaining to you why the leveraged shit he sells is about to monopolize the trillion-dollar stablecoin total potential market (TAM).

If you stop here by reading this, then the only question you need to ask yourself when evaluating investments in stablecoin issuers is: How will they distribute their products? To achieve scale distribution, that is, reaching millions of users at affordable prices, issuers must use channels from cryptocurrency exchanges, Web2 social media giants or traditional banks. Without distribution channels, they have no chance of success. If you cannot easily verify whether the publisher has the right to promote the product through one or more channels, leave now!

Hopefully my readers won’t waste their money in this way because they read this article and are able to think critically about the stablecoin investment opportunities that are before them. This article will discuss the evolution of stablecoin distribution. First, I will discuss the reasons and ways Tether has developed in Greater China, which laid the foundation for their conquering stablecoin payments in the southern hemisphere. I will then discuss the boom of initial token offerings (ICOs) and how this creates a true product market fit for Tether. I will continue to discuss the Web2 social media giant's first attempt to enter the stablecoin space. Finally, I will talk about how traditional banks will be involved. Again, because I know X makes an article that is more than a few hundred characters hard to read, if stablecoin issuers or technology providers can’t distribute through cryptocurrency exchanges, Web2 social media giants or traditional banks, they have no business to do.

Greater China Crypto Bank

Currently, successful stablecoin issuers Tether, Circle and Ethena have the ability to issue their products through large cryptocurrency exchanges. I will focus on Tether’s development and a little introduction to Circle to illustrate that any new entrant is nearly impossible to replicate their success.

At first, cryptocurrency trading was ignored. For example, from 2014 to the late 2010s, Bitfinex has been the largest global exchange outside China. At that time, Bitfinex was owned by a Hong Kong-operated company that had multiple local bank accounts. This is great for an arbitrage trader like me who lives in Hong Kong, as I can transfer funds to the exchange almost immediately. There is a street opposite my apartment in Xiying Pan, where almost all local banks are here. I would take cash to travel between banks to reduce handling fees and collection time. This is very important because it allows me to do a daily turnaround of funds on weekdays.

Meanwhile, in mainland China, the three major exchanges, OKCoin, Huobi and Bitcoin, all have opened multiple bank accounts in large state-owned banks. It took me 45 minutes to get to Shenzhen by bus, and with my passport and basic Chinese skills, I opened multiple local bank accounts. As a trader, I can get all the liquidity around the world by establishing connections with banks in mainland China and Hong Kong. I'm also sure my fiat currency won't be lost. Instead, every time I send money to certain Eastern European exchanges, I feel fear because I don’t trust their banking system.

But as cryptocurrencies continue to gain popularity, banks have begun to close their accounts. You have to check the operational status of each bank's relationship with the exchange every day. This is very bad for my profit as a trader, and the slower the funds flow between exchanges, the less money I make through arbitrage. But what if you could transfer electronic dollars on the blockchain instead of through traditional banking channels? Then, the US dollar, whether in the past or present, is the lifeblood of the crypto capital market and can flow 24/7 between exchanges almost for free.

The Tether team worked with the founders of Bitfinex to develop such a product. In 2015, Bitfinex allowed the use of Tether USD on its platform. At that time, Tether used the Omni protocol as a layer on the Bitcoin blockchain to send Tether USD (USDT) between addresses. This is a prototype smart contract layer built on top of Bitcoin.

Tether allows certain entities to transfer USD to bank accounts, and in return, Tether mints USDT. USDT can be sent to Bitfinex to purchase cryptocurrencies. Damn, why is it so exciting to have only one exchange that offers this kind of product?

Stablecoins, like all payment systems, become valuable only when a large number of economically influential players become network nodes. As far as Tether is concerned, cryptocurrency traders and other large exchanges need to use USDT to solve practical problems, besides Bitfinex.

Everyone in Greater China faces the same dilemma. Banks have closed their accounts of traders and exchanges one after another. In addition, Asians are eager to obtain the US dollar because their home currencies are prone to shock depreciation, high inflation rates, and low interest rates for domestic bank deposits. For most Chinese, it is very difficult or even impossible to obtain trading opportunities in the US dollar and the US financial markets. So Tether, a digital version of the dollar that anyone with an internet connection can use, is extremely attractive.

The Bitfinex/Tether team took advantage of this. Jean-Louis van der Velde, CEO of Bitfinex since 2013, worked for a Chinese automaker. He knows Greater China and is committed to building USDT into the preferred dollar bank account for Chinese cryptocurrency enthusiasts. Although Bitfinex has never had a Chinese executive, it has built a huge amount of trust between Tether and the Chinese cryptocurrency trading community. Therefore, you can rest assured that the Chinese trust Tether. And throughout the Southern Hemisphere, overseas Chinese are in a difficult situation as the imperial citizens discovered in this doomed trade war, so banks in the Southern Hemisphere are provided by Tether.

Just because Tether initially had only one large exchange as a distributor, it didn't guarantee its success. The market structure has changed so dramatically that only using USDT can altcoins trade against the US dollar. Let's turn our time back to 2017, when it was at the peak of the IC0 craze, and Tether really solidified its product-market fit.

IC0 treasure craze

August 2015 was a very important month, as the People's Bank of China (PBOC) depreciated the RMB against the US dollar, and Ethereum's native currency ETH also began trading. The macro and micro levels develop simultaneously. This is legendary and ultimately drove the bull market from that time to December 2017. Bitcoin soared from $135 to $20,000; ETH soared from $0.33 to $1,410.

When printing money, the macro economy is always favorable. Because Chinese traders were marginal buyers of all cryptocurrencies, the cryptocurrencies at that time only refer to Bitcoin. If they are upset about the yuan, Bitcoin will soar. At least that was the case at that time.

The impact depreciation of the People's Bank of China has exacerbated capital flight. Give me dollars, cryptocurrency, gold, foreign real estate, etc. By August 2015, the price of Bitcoin had fallen from the all-time high of $1,300 before the bankruptcy of Gox in February 2014 to the low of $135 on the Bitfinex exchange at the beginning of the month, when Zhao Dong, the largest off-market Bitcoin trader in China, encountered the largest margin call in history on the Bitfinex exchange, with an additional margin of up to 6,000 bitcoins. The argument of China's capital flight triggered a surge in Bitcoin prices; from August to October 2015, Bitcoin/USD rose more than tripled.

The tiny is always the most interesting place. The proliferation of altcoins really began after the launch of the Ethereum main network and its native currency, Ethereum, on July 30, 2015. Poloniex is the first exchange to allow Ethereum trading, and it is this vision that has made them the industry leader in 2017. Funny to say, Circle almost went bankrupt when he acquired Poloniex at the peak of the IC0 market. Years later, they sold the exchange to His Highness Sun for huge losses.

Poloniex and other Chinese exchanges have seized the opportunity of emerging altcoin markets by launching pure cryptocurrency trading platforms. Unlike Bitfinex, these platforms do not need to be connected to the fiat banking system. You can only deposit and withdraw cryptocurrencies and trade with other cryptocurrencies using these cryptocurrencies. But this is not the best option, because traders instinctively want to trade altcoins/USD pairs. Without the ability to accept fiat currency deposits and withdrawals, how can exchanges like Poloniex and Yuncoin (which was China's largest IC0 platform before being stopped by the People's Bank of China in autumn 2017) provide these trading pairs? USDT is here!

After the Ethereum main network is online, USDT can be circulated on the network using the ERC-20 standard smart contract. Any exchange that supports Ethereum can also easily support USDT. Therefore, pure cryptocurrency trading platforms can provide altcoins/USDT trading pairs to meet market demand. This also means that digital dollars can flow seamlessly between mainstream exchanges such as Bifinex, OKCoin, Huobi, Bitcoin China (capital enters this ecosystem) and more interesting and speculative platforms such as Poloniex and Yuncoin (vulgar people play here).

The IC0 fanaticism gave birth to Binance, which later became a giant. A few years ago, Zhao Changpeng resigned from his position as chief technology officer due to a personal dispute with OKCoin CEO Xu Mingxing. After Zhao Changpeng left, he founded Binance with the goal of becoming the world's largest junk currency exchange. Binance has no bank account, and to this day, I don’t know if fiat currency can be deposited directly into Binance without a payment processor. Binance uses USDT as its bank transfer channel and quickly becomes the preferred platform for trading junk coins, and the following story becomes history.

From 2015 to 2017, Tether achieved product-market fit and built a moat against future competitors. Due to the trust of the Chinese trading community in Tether, USDT has gradually been accepted by all mainstream trading platforms. At the time, USDT was not used for payments, but it was the most effective way to transfer digital dollars in and out and internally in the cryptocurrency capital market.

By the late 21910s, exchanges encountered great difficulties in maintaining bank accounts. Taiwan has become the de facto crypto banking hub of all large non-Western exchanges that control the liquidity of most cryptocurrency transactions around the world. This is because some Taiwanese banks allow exchanges to open U.S. dollar accounts and somehow maintain agency bank relationships with large U.S. currency center banks such as Wells Fargo. However, this arrangement began to collapse as agent banks asked these Taiwanese banks to expel all cryptocurrency customers, otherwise they would lose access to the global dollar market. As a result, by the end of the 21910s, USDT became the only way for the US dollar to flow on a large scale in the cryptocurrency capital market. This consolidates its position as a dominant stablecoin.

Many Western players have raised funds using cryptocurrency payments as a selling point, creating Tether's competitors. The only company that survived on a large scale is Circle's USDC. However, Circle’s disadvantages are obvious, as it is a Boston-based U.S. company (Phoat!) that has no connection with the core of cryptocurrency transactions and usage in Greater China. Circle 's unexplained message is: China = terrible; the United States = safe. The message is ironic because Tether has never had a Chinese executive, yet it has been linked to the Northeast Asian market and today's global southern market.

Social media giants want to join

The stablecoin craze has been around for a long time. In 2019, Facebook (now known as Meta) decided to launch its own stablecoin Libra. The appeal of Libra is that Facebook can provide U.S. dollar bank accounts to users worldwide except China via Instagram and Whatsapp. Here is my article about Libra written in June 2019:

The event horizon has passed. Facebook has begun to enter the digital asset industry with Libra. Before starting the analysis, let’s make it clear: Libra is neither decentralized nor has the ability to resist censorship. Libra is not a cryptocurrency. Libra will destroy all stablecoins, but who cares? I don't feel sad about projects that somehow believe that somehow an unprecedented sponsor has value in creating a blockchain-based fiat market fund.

Libra could put commercial banks and central banks in trouble. It may reduce their effect, reducing them to a regulated digital fiat currency warehouse. And this is exactly what these institutions should encounter in the digital age.

The stablecoins launched by Libra and other Web2 social media companies should have stolen the limelight. They have the largest number of customers and have almost complete information about customer preferences and behaviors.

U.S. politics eventually began to take action to protect traditional banks from real competition in the payments and forex fields. I said this at that time:

I have no good feelings for U.S. Rep. Maxine Waters' stupid remarks and actions on the U.S. House Financial Services Committee. But her and other government officials’ concerns were not due to altruism towards their subordinates, but rather about the subversion of the financial services industry, which allowed them to enrich themselves and continue to rule. Government officials have issued a warning to Libra so quickly, indicating that the project has potentially positive value for human society.

That's something in the past, but now the Trump administration will allow competition in the financial markets. Trump 2.0 has no good feelings for banks that removed their entire family from banking services during the administration of US President Biden. Therefore, social media companies are restarting projects that embed stablecoin technology natively into the platform.

This is good news for shareholders of social media companies. These companies can completely swallow up traditional banking systems, payments and foreign exchange revenue sources. However, this is bad news for any entrepreneur who wants to create a new stablecoin, as social media companies build everything they need to support their stablecoin business on their own. Investors in emerging stablecoin issuers must be cautious to see if their promoters claim to work with or distribute through any social media company.

Other technology companies have also joined the ranks of stablecoins. Social media platforms X, Airbnb and Google are all having preliminary discussions on integrating stablecoins into their business operations. In May, Fortune magazine reported that Mark Zuckerberg's Meta (which has tried blockchain technology in the past but failed) is negotiating with cryptocurrency companies to introduce a stablecoin payment solution.

——Source: Fortune

Traditional bank extinction incident

Whether banks want to or not, they will not be able to continue to earn billions of dollars in annual revenue by holding and transferring digital fiat currencies, nor will they earn the same fees by conducting forex transactions. I recently talked about stablecoins with members of a large bank and they said “we’re done.” They believe that stablecoins are unstoppable and take the situation in Nigeria as an example. I'm not sure how much USDT penetration is in Nigeria, but they told me that even after the Nigerian central bank tried very seriously to ban cryptocurrencies, one-third of Nigeria's GDP remained settled in USDT.

They went on to point out that regulators are unable to stop it because adoption is bottom-up rather than top-down. By the time the regulator notices and tries to take action, it is too late because adoption is already prevalent among the crowd.

Although there are people like them in the top positions of every large traditional bank, the banking organism does not want to change because it means the death of many cells (that is, employees). Tether has no more than 100 employees, but can expand with blockchain technology to perform key functions of the entire global banking system. By comparison, JP Morgan, the world's best-operated commercial bank, has more than 300,000 employees.

Banks are facing a crucial moment – ​​either adapt or perish. Yet efforts to limit their streamlining of a bloated workforce and deliver the products needed for the global digital economy have become increasingly complex due to how many people must be hired to perform certain functions. Take my experience at BitMEX as an example, when I tried to open an office in Tokyo and get a cryptocurrency trading license. The management team considers whether it should open a local office and obtain a license to conduct some limited types of cryptocurrency transactions outside of the core derivatives business. The cost of compliance with regulations is a problem because you can’t leverage technology to meet the requirements. The regulator stipulates that you must hire a person with the appropriate level of experience for each compliance and operational function listed. I don't remember the exact figures, but I think it takes about 60 employees to complete all the prescribed functions, each earning at least $80,000 a year, totaling $4.8 million a year. All of this work could have been automated, with less than $100,000 per year paying for SaaS vendors. I would also like to add that doing so will make fewer mistakes than hiring someone who is prone to making mistakes. Oh…and, in Japan, you can’t fire anyone unless the entire office is closed. oops!

The global problem is that banking regulation is nothing more than a plan to provide jobs for overeducated people. Their education is full of nonsense, not really important things. They are just high-paying guys. While bank executives are eager to lay off 99% of their employees, thereby increasing productivity, they can’t do it as regulated agencies.

Stablecoins will eventually be adopted in limited form in traditional banks. They will run two systems simultaneously: the old slow and expensive system and the new fast and cheap system. The extent to which they are truly allowed to adopt stablecoins will be determined by the prudent regulators in each office. Remember, JPMorgan is not a single institution, but its branches in each country are regulated differently. Data and people are often not shared among branches, which hinders company-wide technology-driven rationalization. Good luck, bastard bankers, regulators protect you from Web2, but will kill your survival in Web3.

These banks certainly will not cooperate with third parties to carry out technical development or distribution of stablecoins. They will do all the work by themselves. In fact, regulators may explicitly prohibit this. Therefore, the bank's distribution channel is closed to entrepreneurs who build their own stablecoin technology. I don't care how much proof of concept a certain issuer claims is doing for a traditional bank. They will never lead to adoption throughout the industry. So if you are an investor, if the promoter of a stablecoin issuer claims they will work with a traditional bank to bring their products to the market, then run away quickly.

Now that you have learned about the difficulties new entrants face in obtaining stablecoin-scale issuance, let’s explore why they are trying this impossible. Because being a stablecoin issuer is incredibly lucrative.

US dollar interest rate trend

The profitability of a stablecoin issuer depends on the amount of its net interest income (NIM). The issuer's cost basis is the fees paid to the holder, and the income comes from the return on cash investments of Treasury bonds (such as Tether and Circle) or arbitrage in some cryptocurrency market, such as cash holding transactions (such as Ethena). The most profitable issuer Tether does not pay any fees to USDT holders or depositors, but earns all NIM based on the yield level of T-bill.

Tether is able to preserve all net interest income (NIM) because it has the strongest network effect and its customers have no choice but to have a dollar bank account. Potential customers will not choose any dollar stablecoins other than USDT, as USDT is accepted throughout the southern hemisphere. Let me give you a personal example, how I paid for my ski season in Argentina. I spend a few weeks skiing in the Argentina countryside every year. When I first went to Argentina in 2018, if the merchant did not accept foreign credit cards, payment would be a hassle. But by 2023, USDT has replaced USDT because my guide, driver and chef all accept USDT payments. This is great because even if I want to pay with pesos, I can’t use it; bank ATMs can only take out a maximum of $30 worth of pesos per transaction and charge a 30% handling fee. Damn criminal--Long live Tether. It’s great for my employees to be able to receive digital dollars stored in cryptocurrency exchanges or mobile wallets and use them to easily buy goods and services from home and abroad.

Tether's profitability is the best advertising for social media companies and banks to create stablecoins. The two giants don’t have to pay deposit fees because they already have a solid distribution network, which means they can earn the full net income (NIM). Therefore, this could become their huge source of profit.

Tether's annual profit is far more than this chart estimate. This chart assumes that all reserve assets are invested in 12-month Treasury bonds. The purpose is to show that Tether's profits are highly correlated with U.S. interest rates. You can see that Tether's earnings jumped sharply between 2021 and 2022 as the Fed raised interest rates at its fastest pace since the early 1980s.

This is a form I published in the article “Dust on Crust Part Deux” which uses data from 2023 to prove that Tether is the most profitable bank in the world.

Unless your stablecoin is owned by an exclusive exchange, social media company, or traditional banks, the cost of issuing stablecoins can be very expensive. The founders of Bitfinex and Tether are the same group. Bitfinex has millions of customers, so Tether has millions of customers from the beginning. Tether does not need to pay the issuance fee because it is partly owned by Bitfinex and all altcoins are traded with USDT.

Circle and any other stablecoins that appear subsequently must pay distribution fees through the exchange in some way. Social media companies and banks will never work with third parties to build and operate their stablecoins; therefore, cryptocurrency exchanges are the only option. Cryptocurrency exchanges can build their own stablecoins, just like Binance tries to launch BUSD, but in the end many exchanges think that building a payment network is too difficult and will distract them from their core business. The exchange requires the issuer's equity or the issuer's partial net income (NIM) to trade its stablecoins. But even so, all cryptocurrency/USD pairs are likely to be pegged to USDT, meaning Tether will continue to dominate. That's why Circle had to win over Coinbase for competition. Coinbase is the only large exchange not on the Tether track, as Coinbase’s clients are primarily Americans and Western Europeans. Before U.S. Commerce Secretary Howard Lutnik took a fancy to Tether and banked it through his company Cantor Fitzgerald, Tether had been slammed by Western media as some kind of foreign- made scam. Coinbase’s existence relies on its favor for American politics and therefore has to find alternatives. So Jeremy Allaire took over the position and accepted the deal from Brian Armstrong.

The transaction is that Circle pays 50% of its net interest income to Coinbase in exchange for USDC distribution throughout Coinbase. Yachtzee! !

The situation for new stablecoin issuers is very serious. Lack of open distribution channels. All mainstream cryptocurrency exchanges either own existing issuers Tether, Circle, and Ethena or work with them. Social media companies and banks will build their own solutions. Therefore, new issuers must pass on a large amount of net income (NIM) to depositors to pull them away from other stablecoins with higher adoption rates. Ultimately, that's why investors will lose money at the end of the cycle on almost all publicly listed stablecoin issuers or technology providers. But this doesn't stop the carnival; let's dive into why investors' judgments are blinded by the huge profit potential of stablecoins.

Stablecoin narrative

In addition to holding Bitcoin and other junk coins, there are three business models that can create crypto wealth. They are mining, operating exchanges and issuing stablecoins. Take myself as an example, my wealth comes from my holdings in BitMEX, a derivatives exchange, and Maelstrom, the largest holding and largest source of absolute returns is Ethena, a stablecoin issuer for USDE. In 2024, Ethena became the third largest stablecoin from scratch in less than a year.

The unique feature of the stablecoin narrative is that it has the largest and most obvious TAM (potential market) among traditional finance (TradFi) puppets. Tether has proven that an on-chain bank that only holds people’s funds and allows them to transfer money can become the highest per capita financial institution ever. In the face of law enforcement actions by governments at all levels in the United States, Tether succeeded. What would happen if U.S. authorities at least were not hostile to stablecoins and allowed them to have a certain degree of operational freedom to compete with traditional banks for deposits? Its profit potential is amazing.

Now let's consider the current situation: U.S. Treasury officials believe that the scale of stablecoin issuance (AUC) may grow to $2 trillion. They also believe that the dollar stablecoins can be a pioneer in advancing/maintaining dollar hegemony and act as a price-insensitive buyer of U.S. Treasury bonds. Wow, this is a strong macro tailwind. What’s even more surprising is that Don’t forget that Trump has a deep hatred for the big banks, which deprived him of the banking services of his family and his family’s company after his first presidency. He has no intention of preventing the free market from providing better, faster and safer ways to hold and transfer digital dollars. Even his sons joined the ranks of stablecoins.

That's why investors are so eager for investable stablecoin projects. Before we explore how I translate this statement into a capital investment opportunity, let me define the criteria for investable projects.

Issuers can be listed in some form on the U.S. public stock market. Next, the issuer will launch a product for trading digital dollars; this is not those foreign things, it is "American products." That's it, as you can see, there are a lot of gaps here to get creative.

The Road to Destruction

The most eye-catching IPO for stablecoin issuers is Circle. They are a U.S. company, which is the world's second largest stablecoin issuer by issuance. Circle's current valuation is seriously overvalued. You know, Circle handed over 50% of its interest income to Coinbase. However, Circle's market value is 39% of Coinbase. Coinbase is a one-stop crypto financial store with multiple profitable business lines and tens of millions of customers around the world. Circle is good at "mouth cannons". Although this is a very valuable skill, they still need to improve their skills and take good care of their "stepchildren".

Never short Circle! If you think the Circle/Coinbase ratio is wrong, you should probably buy Coinbase. Although Circle is overvalued, looking back at the stablecoin boom a few years later, many investors will regret their holdings of Circle. At least they can still have some capital left.

The next wave of listing will be Circle's imitators. Relatively speaking, these stocks will have a higher price-to-earnings ratio (P/AUC) than Circle. In absolute terms, their revenue can never surpass Circle. Promoters will tout meaningless TradFi qualifications, trying to convince investors that they have enough connections and capabilities to disrupt them in the global dollar payments space by working with traditional banks or leveraging their distribution channels . This trick will work; the issuer will raise huge amounts of money. For those of us who have been struggling on the front line for a while, it is ridiculous to watch these uniformed clowns deceive the investing public and let them invest in their bad companies.

After the first wave, the scale of fraud depends entirely on the stablecoin regulation formulated by the United States. The greater the freedom issuer has in terms of supporting factors for stablecoins and whether to pay earnings to holders, the more likely they are to use financial engineering and leverage to cover up the scandal. If you assume a mild or even completely contactless stablecoin regulation system, then you might see a repeat of Terra/Luna, and issuers will create some stupid algorithmic stablecoin Ponzi schemes. The issuer can pay high returns to the holder, which come from leveraging some assets.

You should have seen it too, I have nothing to say about the future. There is no real future because the distribution channels for new entrants have been closed. Stop thinking about this. Trading this thing like trading hot potatoes.

But don 't short. These new stocks will tear short sellers to pieces. The macroscopic and microscopic are synchronized. As Chuck Prince, former Citibank CEO, said when asked if his company was involved in subprime mortgages: "When the music stops, it gets complicated in terms of liquidity. But as long as the music is still ringing, you have to stand up and dance. We are still dancing."

I'm not sure how Maelstrom will be involved in the dance, but if we make money, we'll do it.