Arthur Hayes wrote an article today reviewing the history of stablecoins, which has great depth and discusses Circle's stock price. Here are some key points:
Initially, people bought and sold coins using fiat currency, and Bitfinex was the largest exchange outside of China for a long time, having a bank account in Hong Kong.
As banks began closing accounts of crypto companies, Bitfinex launched Tether/USDT in 2015, establishing it as the preferred 'dollar bank account' for the Chinese crypto community.
By 2017, Tether had achieved product-market fit. The rise of Ethereum and Binance provided USDT with faster transfers and more trading scenarios.
In addition to holding Bitcoin and other altcoins, there are three business models to create crypto wealth: mining, operating exchanges, and issuing stablecoins.
Circle's current valuation is significantly overestimated. But absolutely do not short Circle! New stocks will crush short sellers. If you believe the ratio of Circle to Coinbase is off, you might consider buying Coinbase.
Tether has proven that an on-chain bank that only holds people's funds and allows them to transfer can become the most profitable financial institution per capita in history. Stablecoins will eventually be adopted in a limited form by traditional banks.
New stablecoin issuers are in a very tough spot due to a lack of distribution channels. Circle pays 50% of its net interest income to Coinbase in exchange for distribution across the entire network.
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