The US stock CRCL's IPO has increased by 4 times to date! Arthur Hayes warns that the valuation is already too high and suggests switching to buying this asset.

The listing price of Circle was 31 USD, and it has now reached 151 USD. BitMex founder Arthur Hayes pointed out on his personal blog that the valuation of the US stablecoin concept stock Circle is too high after the IPO, but he also warned against shorting CRCL, suggesting to buy Coinbase stocks instead, as the protocol between Circle and Coinbase allows Circle to share 50% of its interest income with Coinbase in exchange for adoption. He also reviewed the history of stablecoin development and analyzed why investing in new stablecoin issuers often leads to total losses for investors.

Bitfinex developed Tether as the beginning of stablecoin.

Arthur Hayes first discusses the past of stablecoins. In 2013, when he first bought Bitcoin, it was still done with cash and transfers to sellers to purchase Bitcoin. Bitfinex was the largest cryptocurrency exchange outside of China from 2014 to the late 2010s. The same group is actually behind Bitfinex and Tether. In 2015, Tether developed Tether USD, and Bitfinex allowed the use of USDT on its platform.

Stablecoins, like all payment systems, only become valuable when a large number of economically influential participants become network nodes ( network effects ). In the case of Tether, apart from Bitfinex, cryptocurrency traders and other major exchanges need to use USDT to address issues. At the same time, the Chinese face the same predicament. Banks are shutting down accounts of traders and exchanges, along with foreign exchange controls. The digital dollar USDT, which can be used by anyone with internet access, becomes extremely attractive.

Tether rides the ICO boom, while the RMB depreciates, making digital dollars the main character in capital outflows.

At the same time, there were significant changes in the market structure. In 2017, during the peak of the ICO boom, Tether truly solidified its product-market fit. August 2015 was a very important month, as the People's Bank of China carried out a dramatic devaluation of the RMB against the US dollar. At the same time, Ethereum began trading. Developments on both macro and micro levels created the bullish market in December 2017. Bitcoin soared from 135 dollars to 20,000 dollars, and Ethereum surged from 0.33 dollars to 1,410 dollars.

The shock depreciation of the renminbi has exacerbated capital flight, and large amounts of renminbi have been exchanged for dollars, cryptocurrencies, gold, foreign real estate, and so on. By August 2015, the price of Bitcoin had fallen from an all-time high of $1,300 before the bankruptcy of Mt. Gox in February 2014 to a low of $135 on the Bitfinex exchange early that month. The thesis of capital flight from China triggered a skyrocketing price of Bitcoin, more than tripling the Bitcoin dollar trading pair from August to October 2015.

Taiwan was once a cryptocurrency banking hub.

Ethereum's alternative coins are constantly emerging, and USDT provides a perfect trading medium for exchanges like Poloniex that deal in these altcoins. These exchanges do not need to have connections with banks, as long as they use USDT as the trading medium. After the Ethereum mainnet went live, USDT can circulate on the network using the ERC-20 token standard. Any exchange that supports Ethereum can also support USDT. Therefore, pure cryptocurrency trading platforms can offer altcoin/USDT trading pairs to meet market demand.

From 2015 to 2017, Tether achieved product-market fit and built its own moat. Due to the trust of the Chinese trading community in Tether, USDT gradually gained acceptance on all major trading platforms. At that time, USDT was not yet used for payments, but it was the most effective way for digital dollars to enter and transfer internally within the cryptocurrency capital market.

At the end of the 2010s, exchanges faced significant difficulties in maintaining bank accounts. Taiwan became the de facto cryptocurrency banking center for all major non-Western exchanges. This was because some Taiwanese banks allowed exchanges to open US dollar accounts and maintained correspondent banking relationships with major banks in the United States. However, as correspondent banks demanded that these Taiwanese banks expel all cryptocurrency clients, USDT became the only way for US dollars to flow on a large scale in the cryptocurrency capital markets.

Stablecoins have become unstoppable, and traditional giants are also beginning to explore the use of stablecoins.

Many Western players want to become competitors to Tether. The only company that survived is Circle's USDC. However, Circle's disadvantages are obvious, as it is a US company with no connection to the core of cryptocurrency trading and usage in the Greater China region. In 2019, Facebook (, now known as Meta), decided to launch its own stablecoin Libra. The appeal of Libra lies in the fact that Facebook can provide services to global users outside of China through Instagram and Whatsapp.

Libra may put commercial banks and central banks in a dilemma. It could diminish their roles, reducing central banks and traditional banks to regulated digital fiat currency warehouses. And this is precisely what these institutions should face in the digital age. As a result, the U.S. political sphere has begun to take action to protect the competitiveness of traditional banks in the payment and foreign exchange sectors. But that is all in the past; Trump 2.0 has no good feelings towards the banks that made life difficult for Trump's family during Biden's administration. Social media platforms Meta, X, Airbnb, Google, Amazon, and Walmart are all exploring stablecoins.

(The Wall Street Journal: Amazon and Walmart plan to issue their own stablecoin)

Arthur Hayes stated that banks can no longer earn billions of dollars annually through holding and transferring digital currencies. He recently discussed stablecoins with a board member of a large bank, who believes that stablecoins are unstoppable. For example, in Nigeria, even though the Central Bank of Nigeria is very serious about trying to ban cryptocurrencies, the settlement amount of USDT in Nigeria still accounts for one-third of its GDP.

Tether has established a usage moat.

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

The reason Tether can maintain its net revenue is that it has the strongest network effect, and its customers have no choice but to use it aside from US dollar bank accounts. Potential customers will not choose other US dollar stablecoins besides USDT, as USDT is accepted throughout the Southern Hemisphere.

Arthur Hayes spends a few weeks skiing in the Argentine countryside every year. When he first went to Argentina in 2018, it was quite troublesome to make payments if merchants did not accept foreign credit cards. But by 2023, USDT has replaced USDT, and tour guides, drivers, and chefs all accept USDT payments. In contrast, bank ATMs only allow withdrawals of up to 30 dollars' worth of pesos per transaction and charge a 30% service fee.

New stablecoin projects often distribute earnings to users in exchange for adoption rates.

Unless your stablecoin is owned by exchanges, social media companies, or traditional banks, the cost of issuing stablecoins can be very high. Bitfinex has millions of customers, so Tether has had millions of customers from the very beginning. Circle and any subsequent stablecoins must distribute their stablecoins in some way, as social media companies and banks will never collaborate with third parties. Therefore, cryptocurrency exchanges are the only option.

Cryptocurrency exchanges can establish their own stablecoins, just like Binance attempted to launch BUSD, but most exchanges believe that building a payment network would distract them from their core business. Coinbase is the only major exchange that does not partner with Tether because Coinbase's customers are primarily Americans and Western Europeans, while Tether has been portrayed as a scam by Western media. Regarding the details of the cooperation between both parties, Arthur Hayes revealed that Circle pays 50% of its net interest income to Coinbase.

The situation for new stablecoin issuers is very severe. There is a lack of distribution channels. New issuers must distribute a large amount of net revenue (NIM) to depositors in order to attract users away from other more widely adopted stablecoins. This is why investing in new stablecoin projects often leads to investors losing everything.

How to cope with Circle's overvaluation? Arthur Hayes suggests buying Coinbase.

As for the future development of stablecoins, U.S. Treasury officials believe that the AUC ( issuance of stablecoins may grow to 2 trillion dollars. Essentially, stablecoin issuers are price-insensitive buyers of U.S. Treasury bonds. Don't forget that Trump harbors deep resentment towards large banks because these banks closed his and his family's bank accounts after his first presidential term.

)The Trump family is being blocked by traditional banks? Eric Trump criticizes that blockchain will eliminate them, Crypto is the future(

In terms of AUC, Circle is the second largest stablecoin issuer globally. However, Arthur Hayes pointed out that Circle's current valuation is severely overestimated. It's important to note that Circle gives 50% of its interest income to Coinbase. Yet, Circle's market value is only 39% of Coinbase's. However, Arthur Hayes also warned against shorting Circle; if you believe the ratio of Circle to Coinbase is incorrect, perhaps you should buy Coinbase.

The next wave of listings will be imitators of Circle. Relatively speaking, these stocks will have a higher price-to-earnings ratio than Circle's valuation. In absolute terms, their revenue can never surpass Circle. Promoters will boast meaningless TradFi credentials, trying to convince investors that they have enough connections and capabilities to disrupt them in the global dollar payment space through partnerships with traditional banks or by leveraging their distribution channels.

This article states that the US stock CRCL has increased 4 times since its IPO! Arthur Hayes warns that the valuation is already too high and suggests switching to buying this target, which first appeared in Chain News ABMedia.