Arthur Hayes: Only stablecoins supported by major exchanges and banks can sustain market prosperity
BitMEX co-founder Arthur Hayes recently published a blog post stating that the stablecoin market has been jointly controlled by new and old forces, and in the future, only stablecoins supported by major exchanges, Web2 platforms, or traditional banks can thrive; otherwise, issuers will struggle to survive.
He recalled history, noting that the closure of banks in Hong Kong and mainland China in the 2010s prompted traders to turn to Tether. Bitfinex and Tether allowed users to deposit US dollars to mint USDT and transfer it between major exchanges, creating an early network effect that established lasting trust in USDT in Greater China and the Global South, forming a moat that is hard for newcomers to overcome.
Hayes attributed the success of stablecoins to three major distribution channels: large crypto exchanges (dominated by Tether), Web2 platforms (partnerships between Circle and Coinbase), and future cryptocurrencies issued by banks. He believes that issuers lacking any of these channels will have no business opportunities.
Issuers profit by holding Treasury bond reserves. USDT retains all interest spreads due to its wide acceptance, while Circle must share half of its net interest income with Coinbase to compensate for the lack of coverage, and new tokens must sacrifice profit margins to attract users in order to balance the breakeven threshold.
Large exchanges tend to cooperate with established tokens, while social media and banking giants are actively getting involved. Hayes warns that non-compliant issuers will face high distribution costs or rely on speculative marketing, and most small companies, even if they see initial stock price increases, will ultimately struggle to survive.
Currently, large exchanges prefer to collaborate with established tokens, and social media and banking giants are also actively positioning themselves. Hayes warns that non-compliant issuers will encounter high distribution costs or speculative marketing, and many small companies, even if their stock prices increase initially, will struggle to escape survival challenges.
Hayes expects that Circle's IPO will attract more weakly capitalized and highly valued imitators into the U.S. market. He also suggests that traders treat related trades as short-term operations and warns that, in a liquid market, short selling still carries risks.
In summary, Hayes believes that closed distribution channels (rather than technology) limit the growth ceiling of stablecoins and contribute to Tether's (USDT) dominance in the stablecoin market, while Circle (USDC) can only maintain development through its alliance with Coinbase.
