Original Author: Arthur Hayes
Original compilation: Deep Tide TechFlow
Reprinted: Luke, Mars Finance
Given that Circle CEO Jeremy Allaire appears to have no choice but to be seated at the “behest” of Coinbase CEO Brian Armstrong (the author is being sarcastic here, implying that he lacks independence and is controlled by Coinbase), I hope that this article will help those investors who trade any “stablecoin”-related assets on the public stock market avoid significant risk and loss as promoters impose worthless assets on uninformed retail investors. With this as the preamble, I will begin to discuss the past, present, and future of the stablecoin market.
In the realm of capital markets, professional cryptocurrency traders are somewhat unique. In order to survive and thrive, they need a deep understanding of how money moves through the global fiat banking system. In contrast, stock investors or forex speculators need not know how stocks or currencies are cleared and transferred because the brokers they must use silently provide this service in the background.
Firstly, buying your first Bitcoin is not easy; what is the best and safest option is not obvious. For most people, the first step (at least when I got into crypto in 2013) was to buy Bitcoin by sending a fiat bank wire or paying in physical cash directly to another individual. Then you graduate to trading on exchanges offering bilateral markets, where you can trade larger sizes of Bitcoin for smaller fees. But depositing your fiat onto an exchange wasn't/isn't easy or straightforward. Many exchanges don't have solid banking relationships or are in a regulatory grey zone in the country they are located, meaning you can't wire funds to them directly. Exchanges come up with workarounds, such as directing users to wire fiat transfers directly to a local agent who issues cash vouchers on the exchange; or establishing an adjacent business that is ostensibly unrelated to crypto in order to look crypto-agnostic to a bank account manager in order to get an account, and directing users to transfer funds there.
Scammers took advantage of this friction to steal fiat in various ways. Exchanges themselves might misreport where the funds went, and then one day… poof-- the website disappeared along with your hard-earned fiat. If third-party intermediaries were used to move fiat in and out of the crypto capital markets, these people could disappear with your funds at any time.
As moving fiat in and out of crypto capital markets was risky, traders had to be intimately aware of and trust the cash flow operations of those they traded with. I learned how to navigate global payments as money moved throughout the Hong Kong, mainland China, and Taiwanese banking systems (I call this region Greater China).
Understanding how money moved throughout Greater China helped me understand how the major Chinese and international exchanges (Bitfinex) operated. This was important, because all of the real crypto capital market innovation happened in Greater China. This was even more so for stablecoins. Why this matters will become apparent.
The success story of the greatest Western crypto exchange belongs to Coinbase, which opened in 2012. However, Coinbase's innovation was getting and maintaining bank relationships in one of the most hostile markets to financial innovation-- Pax Americana. Other than that, Coinbase is just a very expensive crypto brokerage account, and that is all it took to make its early shareholders billionaires.
I'm writing another long article on stablecoins, because of the great success of the Circle IPO. To be clear, Circle is massively overvalued, but the price will keep going up. This listing marks the beginning of this stablecoin mania, not the end. The bubble will pop after a stablecoin issuer lists on a public market (most likely in the US) that uses financial engineering, leverage, and amazing showmanship to separate scores of billions of capital from fools. As usual, most people who surrender their precious capital will have no understanding of the history of stablecoins and crypto payments, why the ecosystem evolved the way it did, and what that means for which issuers will succeed. Some extremely credible and charismatic chap will get on stage, spew all sorts of garbage, wave his (most likely male) hands about, and convince you that the leveraged shit he is peddling is about to monopolize the multi-trillion dollar stablecoin Total Addressable Market (TAM).
If you stop reading here, the only question you need to ask yourself when assessing an investment into a stablecoin issuer is: how will they distribute their product?
To get mass distribution-- and by that, I mean be able to reach millions of users at an affordable cost-- issuers must use the pipes of crypto exchanges, Web2 social media giants, or TradFi banks. If they don't have distribution, they have no chance of succeeding. If you can't easily verify that the issuer has the right to push product through one or more of these channels, run!
Hopefully my readers don't burn their capital in this way, because they read this article, and can think critically about the stablecoin investment opportunities presented to them. This article will discuss the evolution of stablecoin distribution.
First, I will talk about how and why Tether grew in Greater China, which laid the foundation for their conquest of stablecoin payments in the Global South. Then I will discuss the initial coin offering (ICO) craze and how this created true product market fit for Tether. Next, I will discuss Web2 social media giants' first attempt to enter the stablecoin game. Finally, I will briefly mention how TradFi banks will get involved.
Again, because I know X (platform) makes it difficult to read more than a few hundred characters of prose, if a stablecoin issuer or tech provider can't get distribution through crypto exchanges, Web2 social media giants, or TradFi banks, they shouldn't be in the business.
Crypto Banking in Greater China
The stablecoin issuers that are currently successful, Tether, Circle, and Ethena, all have the ability to distribute their product through large crypto exchanges. I will focus on the evolution of Tether and mention Circle briefly to illustrate that it is almost impossible for any new entrants to replicate their success.
At first, crypto trading was ignored. For example, from 2014 to the late 2010s, Bitfinex held the crown as the largest non-Chinese global exchange. At that time, Bitfinex was owned by a Hong Kong operating company that had various local bank accounts. This was great for an arbitrage trader like myself who lived in Hong Kong, because I could wire funds to the exchange in almost real time. I had all the local banks a street away from my apartment in Sai Ying Pun. I would walk cash between banks to reduce fees and the time it took to receive the money. This was extremely important, as it allowed me to turn over my capital once a day on weekdays.
Meanwhile, in China, the three big exchanges, OKCoin, Huobi, and BTC China, all had multiple bank accounts at the large state-owned banks. A 45-minute bus ride to Shenzhen, a passport, and some basic Chinese-speaking skills, and I opened up various local bank accounts. Being a trader on the mainland and in Hong Kong, having banking relationships meant you had access to all the liquidity in the world. I also had the confidence of knowing my fiat wouldn't disappear. Conversely, every time I wired money to some Eastern European-registered exchange, I lived in fear because I didn't trust their banking pipes.
But as crypto grew in prominence, banks began shutting down accounts. Every day you had to check on the operational status of each banking and exchange relationship. This was extremely detrimental to my trading profits, as the slower money moved between exchanges, the less I could make arbing. But what if you could move electronic USD on a crypto blockchain instead of through the traditional banking pipes? Then USD-- the lifeblood of crypto capital markets then as it is now-- could move between exchanges 24/7 for almost free.
The Tether team partnered with the original founders of Bitfinex to create such a product. In 2015, Bitfinex allowed the usage of Tether USD on its platform. At that time, Tether used the Omni protocol as a layer on top of the Bitcoin blockchain to send Tether USD (USDT) between addresses. This was a primitive smart contract layer built on top of Bitcoin.
Tether allowed certain entities to wire USD to its bank account, and in return, Tether would mint USDT. The USDT could be sent to Bitfinex and used to purchase crypto. Wowza, why was it exciting that a random exchange offered this product?
Stablecoins, like all payment systems, only become valuable when a critical mass of economically significant actors become nodes in the network. For Tether, crypto traders and other large exchanges needed to use USDT to solve any real problems besides Bitfinex.
Everyone in Greater China is in the same situation. Banks are closing accounts of traders and exchanges. Add to that Asians wanting access to USD because their home currency is susceptible to shock devaluation, high inflation, and low domestic bank deposit rates. For most Chinese people, access to USD and US financial markets is extremely difficult, if not impossible. Therefore, Tether, which offers a digital version of the USD that anyone with an internet connection can access, is super compelling.
The Bitfinex / Tether team smelled blood. Jean-Louis van der Velde, who has been CEO of Bitfinex since 2013, used to work for a Chinese car manufacturer. He understood Greater China and strove to make USDT the USD banking account of choice for crypto-minded Chinese. Bitfinex, while never having a Chinese executive, developed an immense amount of trust between Tether and the Chinese crypto trading community. Therefore, you could be sure that Chinese people trusted Tether. And in the Global South, overseas Chinese run the show, as Imperial citizens found out in this unfortunate trade war, and therefore the Global South is banked by Tether.
Just because Tether had a large exchange as its founding distributor didn't guarantee success. The market structure shifted such that trading altcoins against USD was only possible through USDT. Let's advance to 2017, at the height of the ICO craze, when Tether truly cemented its product market fit.
ICO Baby
August 2015 was an extremely important month, because the People's Bank of China (PBOC) shock devalued the Renminbi vs. the USD, and Ether (the native money of the Ethereum network) began trading. Macro and micro stages shift in sync. This was legendary and ultimately powered the bull market from then until December 2017. Bitcoin went from $135 to $20,000; Ether went from $0.33 to $1,410.
The macro was always favorable when the printing press was running. Because Chinese traders were the marginal buyers of all crypto (Bitcoin at the time only). If they felt uneasy about the Renminbi, Bitcoin would rip. Or at least that was the narrative at the time.
The PBOC shock devaluation exacerbated capital flight. Bitcoin had fallen from its all-time high of $1,300 prior to the Mt. Gox bankruptcy in February 2014 to a low of $135 on Bitfinex earlier that month, when Zhao Dong (China's largest OTC Bitcoin trader) had the largest margin call of all time on Bitfinex of 6,000 Bitcoin by August 2015. The narrative of Chinese capital flight powered the upside; from August to October 2015, BTCUSD rose over 2x.
The micro is always where the fun is. The explosion of altcoins truly began with the launch of the Ethereum mainnet and its native money Ether on July 30, 2015. Poloniex was the first exchange to allow Ether trading, and it was this foresight that catapulted them to center stage in 2017. Hilariously, Circle almost went bust buying Poloniex near the top of the ICO market. They later sold the exchange for a massive loss to the honorable Justin Sun years later.
Poloniex and other Chinese exchanges leveraged the new altcoin market by rolling out purely crypto trading venues. Unlike Bitfinex, no interfacing with the fiat banking system was required. You could only deposit and withdraw crypto to trade other crypto. But this wasn't ideal, as traders instinctively wanted to trade altcoin/USD pairs. Without the ability to accept fiat deposits and withdrawals, how could exchanges like Poloniex and Yunbi (which was China's largest ICO platform) offer these pairs? Enter USDT!
Once USDT launched on the Ethereum mainnet, it could move on that network using the ERC-20 standard smart contract. Any exchange that supported Ethereum could easily support USDT. Therefore, pure crypto trading venues could offer altcoin/USDT trading pairs to meet market demand. This also meant that digital USD could seamlessly move between the major exchanges-- such as Bitfinex, OKCoin, Huobi, BTC China, etc.-- where capital entered the ecosystem and the more fun and speculative venues-- such as Poloniex and Yunbi-- where gamblers frolicked.
The ICO mania spawned the behemoth that became Binance. CZ (Changpeng Zhao) rage quit from his position as OKCoin CTO a few years earlier due to a personal dispute with CEO Star Xu. CZ then went on to found Binance with the goal of becoming the largest altcoin exchange in the world. Binance had no bank accounts, and to this day I don't know if you can directly deposit fiat onto Binance without going through some payment processor. Binance used USDT as its banking pipes and quickly became the venue of choice to trade altcoins, and the rest is history.
From 2015 to 2017, Tether achieved product market fit and built a moat that could withstand future competitors. Due to the Chinese trading community's trust in Tether, USDT was accepted at all major trading venues. At this point, it wasn't used for payments, but it was the most efficient way to move digital USD both inside and outside of the crypto capital markets and within.
By the late 2010s, it was difficult for exchanges to maintain bank accounts. Taiwan became the de facto crypto banking center for all the largest non-Western exchanges that controlled the bulk of global crypto trading liquidity. This was because several Taiwanese banks allowed exchanges to open USD accounts and somehow managed to maintain correspondent banking relationships with large US money-center banks such as Wells Fargo. However, this arrangement began to unravel as correspondent banks demanded that these Taiwanese banks evict all crypto clients or lose access to the global USD markets. As a result, by the late 2010s, USDT became the only way to move USD at scale within the crypto capital markets. This cemented its position as the dominant stablecoin.
Western actors, many of whom fundraised on the crypto payments narrative, raced to create competitors to Tether. The only one that survived at scale was Circle's USDC. However, Circle was at a distinct disadvantage because it was a US-based company located in Boston with no links to the core of crypto trading and usage-- Greater China. The unspoken message from Circle was/is: China = scary; USA = safe. This message is hilarious, because Tether never had a Chinese executive, but it was/is always associated with North Asian markets, and now the Global South.
Social Media Wants to Join
Stablecoin mania is nothing new. In 2019, Facebook (now Meta) decided it was time to launch its own stablecoin, Libra. The attraction was that Facebook could offer USD bank accounts to the entire world outside of China via Instagram and WhatsApp. Here is what I wrote in June 2019 about Libra:
The event horizon has passed. With Libra, Facebook started dabbling in the digital asset industry. Before I begin my analysis, let me get something clear; Libra is not decentralized, and it's not censorship-resistant. Libra is not a cryptocurrency. Libra will destroy all stablecoins, but who the fuck cares. I won't shed a single tear for all those projects that are somehow deemed to have value which were created by some no-name sponsor and run a fiat currency money market fund on a blockchain.
Libra could lead to the decline of commercial and central banks. It could reduce their utility to a foolish, regulated digital fiat warehouse. While these institutions are just that in the digital age.
Libra and other stablecoins offered by Web2 social media companies could have stolen all the thunder. They had the largest number of clients and almost complete information on their preferences and behaviors.
Eventually the US political establishment acted to protect traditional banks from real competition in the payments and foreign exchange sectors. This is what I said back then:
I have no love for US Congresswoman Maxine Waters and her ridiculous antics on the US House Financial Services Committee. But the outbursts of concern from her and other government officials did not stem from altruistic feelings for their constituents, but rather the fear of the disruption of the financial services industry-- an industry that lines their pockets and maintains their positions. The speed with which government officials rushed to condemn Libra tells you there was some potentially positive value for human society embedded in this project.
That was then, but now the Trump administration will allow competition in financial markets. Trump 2.0 has no love for the banks that de-platformed his entire family during the Biden administration. Therefore, social media companies are reviving their plans to natively embed stablecoin technology within their platforms.
This is great news for social media company shareholders. These companies can completely gobble up revenue streams from traditional banking systems, payments, and foreign exchange. However, this is bad news for any entrepreneur creating a new stablecoin, as social media companies will build everything they need to support their stablecoin operations internally. Investors in new-fangled stablecoin issuers must be wary of promoters touting partnerships with or distribution through any social media company.
Other tech companies are also joining the stablecoin wave. Social media platform X, Airbnb and Google are all in early discussions to integrate stablecoins into their business operations. In May, (Fortune) magazine reported that Mark Zuckerberg's Meta - after past unsuccessful forays into blockchain technology - has been in talks with crypto companies to introduce stablecoins for payments.
– Source: Fortune Magazine
My article "Libra: Zuck Me Gently"
Extinction-Level Event for TradFi Banks
Whether banks like it or not, they won't be able to continue earning billions of dollars a year to hold and transfer digital fiat, nor will they earn the same fees when conducting foreign exchange. I recently spoke to a board member of a large bank about stablecoins, and they said, "We are fucked." They believe stablecoins are unstoppable and point to the case of Nigeria as proof. I previously wasn't aware of the extent to which USDT had penetrated that country, but they told me that one-third of Nigeria's GDP is conducted in USDT, even though the central bank is trying very hard to ban crypto.
They went on to point out that, because adoption was bottom up versus top down, regulators were powerless to stop it. By the time the regulators noticed and tried to do something, it was too late, because adoption was already widespread among the populace.
Even though there are people like them in senior positions at every large TradFi bank, the banking organism does not want to change, because that means the death of many of its cells-- aka, employees. Tether has fewer than 100 employees, and yet it can perform critical functions of the entire global banking system by leveraging blockchain technology. As a contrast, consider that the best-run commercial bank in the world, JP Morgan, employs just over 300,000 people.
Banks are facing a critical moment – adapt or die. But complicating their efforts to streamline bloated workforces and provide the products the global economy requires is prescriptive regulation about how many people must be employed to perform certain functions. Take for example my experience at BitMEX trying to open an office in Tokyo and get a crypto trading license. Management was considering whether it should open a local office and get a license to conduct some limited type of crypto trading outside of our core derivatives business. The cost of compliance regulation was the problem because you can't leverage technology to meet the requirements. Regulators dictated that for each compliance and operations function listed, you must hire a person with the appropriate level of experience. I don't remember the exact figures, but I believe it was something like 60 people at at least $80,000 each, or $4.8 million per year to perform all the prescribed functions. All this work could be automated with less errors than hiring error-prone people, for less than a $100,000 SaaS vendor fee per year. Oh… and you can't fire anyone in Japan unless you close the whole office. Yikes!
Bank regulation is a global problem that designs job creation schemes for an overeducated population. They are overeducated in bullshit, not in things that actually matter. They are just highly paid box tickers. While bank executives would love to cut staff numbers by 99% and therefore boost productivity, as regulated institutions, they cannot.
Stablecoins will eventually be adopted in TradFi banks in a limited form. They will run two parallel systems, the old slow and expensive one, and the new fast and cheap one. How much they are allowed to actually embrace stablecoins will be decided in each office by a prudential regulator. Remember JP Morgan isn't an organism, but rather, each country's instantiation of JP Morgan is subject to different regulation. Data and people often times cannot be shared across instantiations, which prevents company-wide tech-driven rationalization. Good luck bankers, regulators protect you from Web2, but will guarantee you die to Web3.
These banks definitely won't partner with third parties on technology development or stablecoin distribution. All of this they will do internally. In fact, regulators may explicitly prohibit cooperation. Therefore, this distribution channel is closed to entrepreneurs building their own stablecoin technology. I don't care how many Proofs of Concept a particular issuer claims they are doing for TradFi banks. They will never lead to bank-wide adoption. Therefore, if you are an investor, run if a stablecoin issuer promoter claims they will partner with TradFi banks to bring their product to market.
Now that you understand the difficulty new entrants face in getting mass distribution for their stablecoin, let's discuss why they will attempt this impossibility anyway. Because being a stablecoin issuer is extremely lucrative.
The USD Interest Rate Game
The profitability of a stablecoin issuer depends on the amount of Net Interest Income (NIM) available. The issuer's cost basis is the fees they pay to holders, and the revenue comes from the return on cash invested in treasury debt (like Tether and Circle) or some sort of crypto market arbitrage (like the spot-holding carry basis trade, like Ethena). The most profitable issuer, Tether, pays no fees to USDT holders or depositors and earns the entire NIM based on the level of short-term T-bill yields.
Tether is able to keep its entire NIM, because it has the strongest network effects, and its customers have no other USD banking options. An anecdotal example is how I pay during ski season in Argentina. I go skiing in rural Argentina for a few weeks every year. The first time I went to Argentina in 2018, paying was a hassle if vendors didn't take foreign credit cards. But by 2023, USDT had taken over, and my guides, drivers, and cooks all took USDT as payment. This was great, because even if I wanted to, I couldn't pay in pesos; bank ATMs would only spit out a maximum of $30 worth of pesos per transaction and charge a 30% fee. Criminal shit-- Long Live Tether. For my employees, it is great that they can receive digital USD that is stored on a crypto exchange or in their mobile wallet that can easily be used to purchase both domestic and international goods and services.
Tether's profitability is the best advertisement for social media companies and banks to create their own stablecoins. Neither would need to pay for deposits, because they already have rock-solid distribution networks, meaning that they capture the entire NIM. Therefore, this can become a massive profit center for them.
Tether earns more than this chart estimates on an annual basis. This chart assumes all AUC (Assets Under Custody) is invested in twelve-month T-bills. The point is to show that Tether's earnings are highly correlated to US interest rates. You can see the massive jump in earnings from 2021 to 2022, which is due to the Fed raising rates at the fastest clip since the early 1980s.
This is a table I published in my article, "Dust on Crust Part Deux," which clearly indicates with 2023 data that Tether is the most profitable bank in the world on a per-employee basis.
Distributing stablecoins can be extremely expensive, unless you are affiliated with some proprietary exchange, social media company, or TradFi bank. The founders of Bitfinex and Tether were the same people. Bitfinex had millions of clients, so out of the box, Tether had millions of clients. Tether didn't have to pay for distribution, as it was partially owned by Bitfinex, and all the altcoins traded against USDT.
Circle, and any other stablecoin that comes after, must pay exchanges some form of distribution fee. Social media companies and banks will never partner with third parties to build and operate their stablecoins; therefore, crypto exchanges are the only option.
Crypto exchanges could build their own stablecoins, like Binance attempted with BUSD, but ultimately many exchanges felt that building a payments network was too hard and would distract from their core business. Exchanges want either an equity stake in the issuer or a cut of the issuer's NIM to allow their stablecoin to trade.
But even then, it's very likely that all crypto/USD pairs will still be paired with USDT, meaning that Tether will continue to dominate the market. This is why Circle had to cozy up to Coinbase. Coinbase is the only major exchange that is not in the orbit of Tether, because Coinbase's clientele is primarily Americans and Western Europeans.
Before US Commerce Minister Howard Lutnik favored Tether and provided banking services to it through his company Cantor Fitzgerald, Tether was constantly criticized by the Western media as some kind of foreign-made scam. Coinbase's existence depends on the favor of US political institutions, and it must find an alternative. Therefore, Jeremy Allaire struck a pose and accepted Brian Armstrong's request.
The deal is this: Circle pays Coinbase 50% of its net interest income in exchange for distribution throughout the Coinbase network. Yachtzee!!
The situation is dire for new stablecoin issuers. There are no open distribution channels. All the major crypto exchanges either own an issuer or partner with existing issuers Tether, Circle, and Ethena. Social media companies and banks will build their own solutions.
Therefore, a new issuer must turn over a significant portion of its NIM to depositors to try and pry them away from other, more adopted stablecoins. Ultimately, that is why investors will lose almost all of their money in almost every publicly listed stablecoin issuer or tech provider at the end of this cycle. But that won't stop the party from happening; let's delve into why investors' judgment will be clouded by the massive stablecoin earning potential.
Narrative
There are three business models responsible for creating cryptocurrency wealth outside of simply holding Bitcoin and other altcoins. They are mining, running an exchange, and issuing a stablecoin. In my own case, my wealth came from BitMEX (a derivatives exchange) that I owned, and the largest position and asset that has generated the most absolute return for Maelstrom (my family office) is Ethena, the issuer of the USDE stablecoin. Ethena went from zero to the third-largest stablecoin in under a year in 2024.
What's unique about the stablecoin narrative is that it has the largest and most obvious Total Addressable Market (TAM) for TradFi (Traditional Finance) dummies.
Tether has proven that a blockchain-based bank that merely holds people's money and allows them to move it back and forth can be the most profitable financial institution per employee ever created. Tether has succeeded in the face of lawfare launched by the US government at all levels.
What would happen if US authorities were at least not hostile to stablecoins and allowed them some operational freedom as they compete with traditional banks for deposits? The earning potential is insane.
Now consider the current setup, where staffers at the US Treasury think stablecoin AUC (Assets Under Custody) could grow to $2 trillion. They also think USD stablecoins could be the spear tip to advance/maintain USD hegemony while also being price-insensitive buyers of treasury debt.
Wowza, what a major macro tailwind. As a delicious bonus, remember that Trump has a grudge against the big banks for de-platforming him and his family after his first presidential term. He has no intention of preventing the free market from offering better, faster, and more secure ways of holding and transferring digital USD. Even his sons have jumped into the stablecoin game.
That is why investors are salivating at investable stablecoin projects. Before I continue with my prediction of how this narrative will translate into burn-money opportunities, let me first define the criteria for an investable project.
That the issuer in question is able to publicly list on a stock market in the US in some form. Secondly, that the issuer offers a product that moves digital USD; none of that foreign shit, this is "Murica." That's it, and as you can see, there is a lot of blank space in here to get creative.
The Road to Ruin
The most obvious issuer to IPO and start the party is Circle. They are a US company and the second largest stablecoin issuer by AUC.
Circle is massively overvalued at this stage. Remember that Circle gives Coinbase 50% of its interest income. Yet, Circle's market cap is 39% that of Coinbase. Coinbase is a one-stop crypto financial shop with multiple profitable business lines and tens of millions of customers globally. Circle is good at fellatio, and while that is a very valuable skill, they still need to upskill and take care of their step-children.
Should you short Circle? Absolutely not! Maybe you should buy Coinbase if you believe the Circle/Coinbase ratio is out of whack. Even though Circle is overvalued, when we look back in a few years at the stablecoin mania, many investors will wish they simply held Circle. At least they would have had some capital left over.
The next wave of listings will be Circle imitators. These stocks will be more overvalued, relatively speaking, in terms of the Price/AUC ratio than Circle. Absolutely, they will never surpass Circle in revenue generation.
Promoters will tout meaningless TradFi credentials in an attempt to convince investors that they have the relationships and wherewithal to disrupt TradFi's dominance in global USD payments by partnering with them or leveraging their distribution channels. Scams will work; issuers will raise a fuck ton of money. It will be hilarious for those of us who have been in the trenches for a while to watch these suited clowns be able to fool the public into investing in their shit cos.
After this first wave, the scale of the scams will depend entirely on the stablecoin regulations that are enacted in the US. The more freedom issuers have on the assets that back the stablecoin and whether they can pay yields to holders, the more financial engineering and leverage that can be used to paper over the shit. If you assume a light or no-touch stablecoin regulatory regime, then you might see a Terra/Luna redux where some issuer creates some sort of fraudulent algorithmic stablecoin ponzi. Issuers can pay holders high yields, which are earned from applying leverage to certain asset holdings.
As you can see, I don't have much to say about the future relatively. There is no real future, because the distribution channels for new entrants are closed. Shake it off.
But don't short it. These new stocks will rip the faces off of shorts. Macro and micro are aligned. As Chuck Prince, the ex-CEO of Citigroup, said when asked if his company was involved in subprime mortgages, “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing.”
I'm not sure how Maelstrom will dance, but if there is money to be made, we will go make it.
