Assume The Position

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While Circle CEO Jeremy Allaire has no choice by to assume the position at the behest of his daddy gimp Coinbase CEO Brian Armstrong, I hope that for those of you who trade anything "stablecoin" related in the public equity markets this essay can prevent a rapid expansion of your sphincter as promoters jam dogshit up the behinds of clueless punters. It is with that preamble that I shall begin a discussion of the past, present, and future of the stablecoin market.

Within the capital markets firmament, professional crypto traders are somewhat unique in that to survive and thrive requires an in-depth knowledge of how money moves throughout the global fiat banking system. A stock picker or forex punter doesn’t need to know how stocks and/or currencies are settled and transferred. The broker, whose services must be used to trade, provides this service silently in the background.

To begin with, buying your first Bitcoin is not easy; it is unclear what is the best and safest option. The first step for most, at least when I started slinging crypto in 2013, is buying Bitcoin from another individual by sending them a fiat bank wire directly, or paying in physical cash. Then you graduate to trading on an exchange that provides a two-sided market place where you can trade Bitcoin in larger size for a smaller fee. But depositing your fiat onto an exchange was/is not easy or straightforward. Many exchanges do not have rock solid banking relationships, or exist in a regulatory grey area in their domestic country which means you cannot wire them money directly. The exchange figures out work arounds like directing users to transfer fiat directly to local agents who issue cash vouchers on exchange, or standing up an adjacent business that appears to a bank account opening officer to be unaffiliated with crypto in order to obtain an account and directing users to transfer funds there.

Scammers take advantage of this friction by stealing fiat in various ways. The exchange itself could be lying as to where funds are going, and one day… poof - the website disappears alongside your hard-earned fiat. If third party intermediaries are used to ferry fiat into and out of the crypto capital markets, those individuals can evaporate with your funds at any point.

Due to the risks involved with moving fiat around the crypto capital markets, traders must know and trust the cash flow operations of those they trade with in detail. I received a crash course in global payments when money moved within the Hong Kong, Mainland Chinese, and Taiwanese banking system (I will refer to this region as Greater China).

Understanding how money flowed in Greater China helped me understand how the major Chinese and international exchanges (Bitfinex) conducted their business. This is important because all real crypto capital markets innovation occurred in Greater China. And this is even more true for stablecoins. The reason why this is important will become apparent so read on. The greatest crypto exchange success story in the West belongs to Coinbase which opened its doors in 2012. However, Coinbase’s innovation was obtaining and retaining banking relationships in one of the most hostile markets to financial innovation, Pax Americana. Otherwise Coinbase is just a very expensive brokerage account for crypto, and that’s all it ever needed to be to propel its early shareholders to billionaire status.

The reason why I’m writing another missive about stablecoins is because of the blow out success of the Circle IPO. To be clear, Circle is grossly overvalued, but the price will continue levitating. The listing marks the beginning not the end of this cycle’s stablecoin mania. The bubble will pop after the launch of a stablecoin issuer on a public market, most likely in the US, that separates fools from tens of billions of capital by using a combination of financial engineering, leverage, and amazing showmanship. As usual, most of those who will part with their precious capital will not understand the history of stablecoins and payments within crypto, why the ecosystem has evolved the way it has, and what that means about which issuers will be successful or not. A very bankable charismatic individual will get on stage and spew all sorts of nonsense, wave his (most likely a male) hands to and fro, and convince you why the leveraged piece of dogshit he is selling is about to corner the multi-trillion dollar stablecoin total addressable market (TAM).

If you stop reading here, the only question you must ask yourself when evaluating an investment in a stablecoin issuer is this: how will they distribute their product? To distribute at scale, and by that, I mean have the ability to reach millions of users affordably, an issuer must use the pipes of a crypto exchange, a Web2 social media goliath, or a legacy bank. If they have no distribution, they have no chance of success. And if you can’t easily verify that said issuer has the access to push product through one or more of these channels, run away!

Hopefully my readers will not incinerate their capital in this fashion because they read this essay and can think critically about the stablecoin investment opportunities placed before them. This essay will discuss the evolution of stablecoin distribution. First, I will talk about why and how Tether grew in Greater China, which set them up to conquer stablecoin payments in the Global South. Then I will discuss the Initial Coin Offering (ICO) boom and how this created a true product-market fit for Tether. I will move onto discuss the first attempts by Web2 social media giants to get into the stablecoin game. And finally, I will touch upon how legacy banks will get into the action. To repeat, because I know X makes it difficult to read a piece of prose longer than a few hundred characters, if a stablecoin issuer or tech provider cannot distribute through a crypto exchange, Web2 social media giant, or legacy bank, they have no business.

Greater China Crypto Banking

Currently the successful stablecoin issuers Tether, Circle, and Ethena all have the ability to distribute their product through a large crypto exchange. I will focus on the evolution of Tether and to a small degree Circle to illustrate that for any new entrant it will be almost impossible to repeat their success.

In the beginning, crypto trading was ignored. For example, from 2014 until late in the 2010s, Bitfinex held the crown as the largest non-Chinese global exchange. Back then Bitfinex was owned by a Hong Kong operating company that had a variety of local bank accounts. This was great for an arbitrage trader like myself who lived in Hong Kong as I could wire money onto the exchange almost instantaneously. Across the street from my apartment in Sai Ying Pun was a street that contained almost every local bank. I would walk cash between the banks to cut down on fees and on how long it took to receive my money. This was very important because it allowed me to turn my capital once per day during the work week.

At the same time in Mainland China (aka “China”) the big three exchanges, OKCoin, Huobi, and BTC China, all had multiple bank accounts at the large state-owned banks. Physically travelling to Shenzhen by bus took 45 minutes, and armed with my passport and basic Chinese language skills, I opened a variety of local bank accounts. By having banking relationships as a trader in China and Hong Kong you had access to all the liquidity globally. I also felt confident knowing my fiat wouldn't go missing. Conversely, I lived in fear every time I sent a wire to certain Eastern European domiciled exchanges because I didn’t have trust in their banking rails.

But as crypto’s profile rose, banks started closing accounts. Every day you had to check the operational status of each bank<>exchange relationship. This was very detrimental to my profits as a trader, the slower money moved between exchanges, the less money I could make conducting arbitrage. But what if you could move an electronic dollar on a cryptographic blockchain and not via traditional banking rails? Then dollars, the life blood of crypto capital markets then as is now, could move 24/7 for almost free between exchanges.

The team at Tether in collaboration with the original founders of Bitfinex created such a product. In 2015 Bitfinex allowed Tether USD to be used on its platform. Back then Tether used the omni protocol as a layer on top of the Bitcoin blockchain to send Tether USD (USDT) between addresses. It was a proto smart contract layer built on top of Bitcoin.

Tether would allow certain entities to wire them USD in a bank account, and in return Tether would mint USDT. USDT could be sent to Bitfinex and purchase crypto. Whoopty fucking doo, why was this exciting that just one random exchange offered this product?

Stablecoins, just like all payments systems, only become valuable when large numbers of economically significant participants become nodes in the network. With regards to Tether, apart from Bitfinex, crypto traders and other large exchanges needed to use USDT for it to solve any real problems.

Everyone in Greater China was in the same boat. The banks were closing accounts both for traders and exchanges. Add to that the desire of Asians to obtain dollars because their domestic currencies were prone to shock devaluations, high inflation, and low domestic bank deposit rates. For most Chinese folks obtaining access to dollars and US financial markets is very difficult, if not impossible. Therefore Tether, with a digital version of USD available to anyone with an internet connection, was super appealing.

The Bitfinex / Tether team leaned into this. The CEO of Bitfinex from 2013 onwards, Jean-Louis van der Velde, had prior experience at a Chinese auto manufacturer. He knew Greater China, and endeavored to make USDT the go to dollar bank account for crypto-minded Chinese folks. Bitfinex, while never having any ethnically Chinese c-suite denizens, created massive trust between Tether and the Chinese crypto trading community. Therefore, you can take it to the bank that the Chinese trust Tether. And throughout the global south, overseas Chinese run shit as citizens of the empire are discovering in this ill-fated trade war, therefore the Global South is banked by Tether.

Just because Tether had one large exchange as its foundering distributor didn’t ensure success. The market structure changed in such a way that trading altcoins vs. USD was only possible by using USDT. Let’s progress forward to 2017, at the height of the ICO craze where Tether really cemented its product-market fit.

ICO Baby

August 2015 was a very important month because the People’s Bank of China (PBOC) conducted a shock devaluation of the yuan vs. the dollar, and Ether (the native currency on the Ethereum network) began trading. The macro and the micro phase shifted into sync. This is the stuff of legend, and ultimately powered the bull run from then onwards to December 2017. Bitcoin pumped from $135 to $20,000; Ether from $0.33 to $1,410.

The macro is always favorable when money is being printed. As Chinese traders were the marginal buyers of all crypto, which at point just meant Bitcoin. If they felt queasy about the yuan, Bitcoin pumped. At least that was the narrative.

The PBOC shock devaluation increased capital flight. Fuck yuan, give me dollars, crypto, gold, foreign property, etc. Bitcoin by August 2015 had declined from an all-time high of $1,300 pre-Mt. Gox bankruptcy in February 2014 to $135 the low on Bitfinex earlier that month when ZhaoDong, China’s largest OTC Bitcoin dealer, suffered the largest ever margin call to the tune of 6,000 BTC on Bitfinex. The Chinese capital flight narrative started the pump; from August to October 2015, BTCUSD more than tripled.

The micro is always where the most fun is to be had. The proliferation of shitcoins really started after the Ethereum mainnet, and its native currency Ether, went live on 30 July 2015. Poloniex was the first exchange to allow Ether trading, and it was this foresight that propelled them to Main Character status by 2017. Circle, funny enough, almost bankrupted themselves purchasing Poloniex at the top of the ICO market. They would sell the exchange at a massive loss to His Royal Highness Justin Sun many years later.

Poloniex and other Chinese exchanges capitalized on the new altcoin market by launching crypto-only trading platforms. Unlike Bitfinex, there was no need to interface with the fiat banking system. You could only deposit and withdraw crypto, which you used to trade against other cryptos. But this was suboptimal because traders instinctively want to trade shitcoin/USD pairs. Without the ability to accept fiat deposits and withdrawals, how could exchanges like Poloniex and Yunbi (the largest Chinese ICO platform until they get deaded by the PBOC in the fall of 2017) offer these trading pairs. Enter USDT!

USDT post Ethereum mainnet launch, could move on said network using an ERC-20 standard smart contract. Any exchange that supported Ethereum also could easily support USDT. Therefore crypto-only trading platforms could offer shitcoin/USDT pairs and satisfy the market. It also meant that digital dollars could flow seamlessly between the major exchanges like Bifinex, OKCoin, Huobi, BTC China, etc. where capital entered the ecosystem, and the more fun and speculative venues like Poloniex and Yunbi where degens frolicked.

The ICO mania birthed the juggernaut that would become Binance. CZ rage quit as the CTO of OKCoin a few years prior over a personal dispute with the CEO Star Xu. CZ left and started Binance with a goal to become the largest shitcoin exchange globally. Binance didn’t have a bank account, and to this day I don’t know if you can directly deposit fiat to Binance without going through some payment processor. Binance used USDT as its banking rails, quickly became the go to place to trade shitcoins, and the rest is history.

From 2015 to 2017 Tether achieved product-market fit and created a moat against future competitors. Due to the trust the Chinese trading community placed in Tether, USDT became accepted across all the major trading venues. At this point it wasn’t used for payments, but it was the most efficient way to move digital dollars in, out, and within the crypto capital markets.

By the end of the decade exchanges were having a very tough time keeping bank accounts. Taiwan became the de facto center of crypto banking for all the largest non-Western exchanges, which controlled the majority of global crypto trading liquidity. That is because a few Taiwanese banks allowed exchanges to open USD accounts and somehow were able to maintain their correspondent banking relationships with large money center US banks like Wells Fargo. However, this arrangement began to break down as the correspondent banks demanded these Taiwanese banks eject all their crypto clients or else lose access to the global dollar markets. As a result, by the end of the decade, USDT was the only way that dollars could move at scale in the crypto capital markets. This cemented its role as the dominant stablecoin.

The Western players, many of whom raised money on a narrative of crypto payments, scrambled to create Tether competitors. The only one that survived at scale was Circle’s USDC. However, Circle is at a distinct disadvantage because it is an American company based in Boston (yuck!) with no connection to the heart of crypto trading and usage in Greater China. Circle’s unsaid message was/is China = Scary; America = Safe. The message is funny because Tether never had an ethnically Chinese executive, however it always was/is associated with the north east Asian markets and today the Global South.

Social Media Wants In

Stablecoin mania is not new. In 2019 Facebook, now called Meta, decided it was time it launched its own stablecoin called Libra. The appeal was that Facebook through Instagram and Whatsapp could offer a USD bank account to the entire world ex-China. This is what I wrote about Libra in June 2019:

The event horizon has passed. With Libra, Facebook begins its foray into the digital asset industry. Before I begin my analysis, let’s get one thing straight; Libra is not decentralized nor censorship resistant. Libra is not a cryptocurrency. Libra will destroy all stablecoins, but who gives a fuck. I shed no tears for all those projects that somehow believed there was value in an unheard-of sponsor creating a fiat money market fund that rode on a blockchain.

Libra could lay commercial banks and central banks low. It might reduce their usefulness to a dumb regulated warehouse for digital fiat money. And that is exactly what should happen to these institutions in a digital age.

Libra and other stablecoins offered by other Web2 social media companies could have stolen the show. They owned the largest number of customers and had almost complete information on their preferences and behavior.

Ultimately the US political establishment swung into gear to protect the legacy banks from true competition in payments and forex. I had this to say back then:

I have no love lost for US Representative Maxine Waters’ idiotic statements and actions on the US House Financial Services Committee. But her and other government officials’ outbursts of concern are not driven by altruistic feelings towards their subjects, but rather a fear of the upending of the financial services industry that lines their pockets and keeps them in office. The speed at which government officials rushed to admonish Libra tells you there is some potential positive value to human society embedded in the project.

That was then, but now the Trump administration will allow competition in the financial markets. Trump 2.0 has no love for the banks that deplatformed his entire family during US President Biden’s administration. As such, social media companies are reviving projects to embed stablecoin technology natively in platforms.

For social media company shareholders this is great news. These companies can completely devour the legacy banking systems, payments and forex revenue streams. This however is terrible news for any entrepreneur creating a new stablecoin as social media companies will build everything needed to power their stablecoin business in house. Investors in newfangled stablecoin issuers must beware if the promoters tout partnering with or distributing through any social media company.

Other tech companies are jumping on the stablecoin trend as well. Social media platform X, Airbnb, and Google are all in early conversations about integrating stablecoins into their business operations. And in May, Fortune reported that Mark Zuckerberg’s Meta—which has unsuccessfully experimented with blockchain technology in the past—has been in discussions with crypto companies to introduce the use of stablecoins for payouts.

– Source: Fortune

Link to my essay “Libra: Zuck Me Gently”

Legacy Banking Extinction Level Event

Whether the banks like it or not, they will not be able to continue earning billions of dollars per year in revenue holding and transferring digital fiat nor will they be able to earn the same fees conducting forex transactions. I was speaking with a board member of a large bank recently about stablecoins and they said “we are fucked”. They believed that stablecoins are unstoppable and offered the situation in Nigeria as proof of that. I was not aware of the degree to which USDT penetrated that country, but they told me that ⅓ of Nigerian GDP is conducted in USDT even after very serious attempts by the central bank to ban crypto.

They continued to note that because adoption is from the ground up and not top down, regulators are powerless to stop it. By the time regulators take notice and try to do something it’s too late because adoption is endemic within the population.

Even though there are people like them in senior positions at every large legacy bank, the banking organism doesn't want to change because it means death to many of its cells, aka employees. Tether with no more than a 100 person staff can scale to conduct the critical functions of the entire global banking system by leveraging blockchain technology. For a point of contrast consider that JP Morgan, the best run commercial bank in the world, employs a little over 300,000 souls.

The banks are facing a moment of critical importance - adapt or die. But complicating their efforts to streamline their bloated workforce and offer the product a global digital economy requires, are prescriptive regulations on how many humans must be employed to perform certain functions. As an example, take my experience at BitMEX attempting to open a Tokyo office and obtain a crypto trading license. The management team considered whether we should open a local office and obtain a license to do some limited types of crypto trading outside our core derivatives business. The cost of complying with the regulations was the problem because you could not leverage technology to meet the requirements. The regulators stipulated that for each compliance and operational function outlined you must hire one person of a suitable experience level. I don’t remember the exact figures, but I believe it would have required something on the order of 60 people each earning at least $80,000 per annum for a total of $4.8 million per year to perform all the stipulated functions. All this work could have been automated for less than $100,000 per year in SaaS vendor fees. And I add, it would have been done with less errors than employing fallible humans. Oh … and you cannot fire anyone in Japan unless you close the entire office. Yikes!

The problem globally is banking regulations are make-work programs for an over educated population. They are over educated in bullshit, not in real things that actually matter. They are just highly paid box tickers. As much as a banking executive would love to slash their employee count 99% and increase productivity as a result, they cannot as regulated institutions.

Stablecoins will ultimately be adopted in a limited form at legacy banks. They will run two concurrent systems, the old slow expensive one, and the new fast cheap one. The degree to which they are allowed to truly embrace stablecoins will be decided in each office by prudential regulators. Remember JP Morgan is not one organism but each country instance of JP Morgan is regulated differently. Data and personnel many times cannot be shared between instances, which disallows company-wide technology driven rationalization. Good luck wanker bankers, regulations protect you from Web2, but will cement your death from Web3.

What these banks will certainly not do is partner with a third party in technological development or distribution of stablecoins. They will do all of this inhouse. In fact, the regulators might explicitly forbid it. It follows then that 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 to be conducting for a legacy bank. They will never lead to bank-wide adoption. Therefore, if you are an investor, run for the hills if a stablecoin issuer promoter claims that they will partner with a legacy bank to push their product out to market.

Now that you understand the difficulty a new entrant faces in obtaining distribution at scale of their stablecoin, let’s discuss the reason why they will attempt the impossible anyway. Because it’s fucking insanely profitable to be a stablecoin issuer.

USD Rates Play

Stablecoin issuer profitability rests on the amount of net interest income (NIM) available. The issuer’s cost base is fees paid to holders and revenue comes from cash investment returns in treasury debt (like Tether and Circle) or some sort of crypto markets arbitrage like cash-and-carry basis trading (like Ethena). Tether, the most profitable issuer, pays nothing to USDT holders or depositors, and earns the full NIM based on the level of treasury bill (T-bill) yields.

Tether is able to keep its full NIM because it has the strongest network effect, and its clients have no other option for a USD bank account. A prospective client would not choose another USD stablecoin over USDT because USDT is accepted throughout the Global South. A personal example is how I conduct payments in Argentina during the ski season. I spend a few weeks per year skiing in rural Argentina. The first time I went to Argentina in 2018, paying for things was a hassle if a vendor didn’t accept a foreign credit card. But by 2023, USDT had taken over as my guide, driver, and cook all accept USDT as payment. It’s glorious because even if I wanted to, I cannot pay in Pesos; the bank ATM dispenses a maximum of $30 worth of Pesos per transaction with a 30% fee. Fucking Criminal - Long Live Tether. For my staff it's great that they receive digital dollars stored on a crypto exchange or their mobile wallet, and can easily spend them on domestic and international goods and services.

Tether’s profitability is the best advertisement for social media companies and banks to create their own stablecoin. Neither cohort would have to pay for deposits because they already possess rock solid distribution networks, which means they capture the full NIM. Therefore, this could become a massive profit center for them.

Tether earns more money per year than this graph estimates. This assumes that all AUC is invested in twelve-month T-bills. The point is to show that Tether’s earnings are very correlated to US interest rates. You can see the massive jump in earnings from 2021 to 2022 due to the Fed hiking rates at the fastest pace since the early 1980s.

Here is a table published in my essay “Dust on Crust Part Deux” which demonstratively shows using 2023 data that Tether is the most profitable bank per employee in the world.

Distributing a stablecoin can be very expensive unless you are owned by a captive exchange, social media company, or legacy bank. The founders of Bitfinex and Tether were some of the same individuals. Bitfinex has millions of clients, and therefore out of the box Tether had millions of clients. Tether does not have to pay for distribution because it was partially owned by Bitfinex, all altcoins are traded vs. USDT.

Circle and any other stablecoins that came after had to pay for distribution through exchanges in some way shape or form. Social media companies and banks will never partner with a third party to build and operate their stablecoin; therefore, crypto exchanges are the only game in town. Crypto exchanges could build their own stablecoin, like Binance attempted with BUSD, but ultimately many of them decided building a payments network is too hard and is a distraction from their core business. Exchanges require equity in the issuer or a portion of the issuer’s NIM to allow the trading in their stablecoin. But even then, all crypto/dollar trading pairs most likely will be against USDT, which means Tether continues to dominate. This is why Circle had to cozy up to Coinbase to compete. Coinbase was the only major exchange not in Tether’s orbit as Coinbase’s customers are predominantly Americans and Western Europeans. Before Howard Lutnik, the US Commerce Secretary, took a shine to Tether and banked them through his firm Cantor Fitzgerald, Tether was constantly bashed in the Western press as some foreign created scam. Coinbase, whose existence is predicated on being in the good graces of the American political establishment, had to find an alternative. And thus, Jeremy Allaire assumed the position and accepted Brian Armstrong’s star-spangled dick sans lube.^[1]

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

The situation for new stablecoin issuers is very dire. There are no open distribution channels. All the major crypto exchanges either own or partner with existing issuers Tether, Circle and Ethena. Social media companies and banks will build their own solution. Therefore, a new issuer must then pass on a substantial amount of their NIM to depositors in a bid to pry them away from other stablecoins with superior adoption. Ultimately this is why investors will lose their shirts by the end of the cycle on almost every stablecoin issuer or tech provider that publicly lists. But that’s not going to stop the party; let’s dig into why investors’ judgement will be clouded by the massive stablecoin profit generation potential.

The Narrative

There are three business models responsible for creating crypto wealth outside of just hodling Bitcoin and other shitcoins. They are mining, operating an exchange, and issuing a stablecoin. Taking myself as an example, my wealth comes from my ownership of BitMEX (a derivatives exchange), and Maelstrom’s (my family office) biggest position and largest generator of absolute return is Ethena, the stablecoin issuer of USDE. Ethena went from nothing to the third largest stablecoin in under a year during 2024.

The stablecoin narrative is unique in that it has the largest most obvious TAM for a TradFi muppet. Tether has already proven that an onchain bank that just holds people’s money and allows them to transfer it to and fro can become the most profitable financial institution per employee ever. Tether succeeded in the face of lawfare perpetrated by all levels of the American government. What would happen if the US authorities were at a minimum just not antagonistic towards stablecoins and allowed them some modicum of operational freedom to compete for deposits against legacy banks? The profit potential is insane.

Now let’s consider the current setup where the US Treasury staff believes stablecoin AUC could grow to $2 trillion. They also believe that USD stablecoins could be the tip of the spear to both advance/maintain USD hegemony and act as price insensitive buyers of treasury debt. Whoa, this is a serious macro tailwind. As a delicious bonus, remember that Trump has a simmering hatred of the large banks because they de-platformed him and his family after his first presidential term. He is in no mood to hold back the free market from offering a better, faster, and safer way to hold and transfer digital dollars. Even his sons jumped into the stablecoin game.

This is why investors are frothing at the mouth for investable stablecoin projects. Before we move onto my future prognosis for how this narrative will translate into opportunities to torch capital, let me define the criteria for an investable project.

The issuer in question is able to list in some way shape or form on a US public stock market. Next the issuer offers a product that moves digital US dollars; none of that foreign shit, this is ‘Murica. That’s it, as you can tell there is a lot of white space here to be creative.

The Road to Destruction

The most obvious issuer to IPO and kick off the party was Circle. They are a US firm that is the number two largest stablecoin issuer by AUC. Circle at this stage is insanely overvalued. Remember that Circle hands 50% of its interest income to Coinbase. However, Circle’s market cap is 39% of Coinbase’s. Coinbase is a one-stop crypto financial shop complete with multiple profitable business lines and tens of millions of clients globally. Circle is good at fellatio, and while a very valuable skill, they still need to upskill and mind the step-children.

Should you short Circle, ABSOLUTELY NOT! Maybe if you believe the Circle/Coinbase ratio is off, you should buy Coinbase. Even though Circle is overvalued, when we look back in a few years’ time at the stablecoin mania, many investors will wish they had just held Circle. At least they will still have some capital left.

The next wave of listings will be Circle copycats. In relative terms, these stocks will be even more overvalued on a Price/AUC ratio than Circle. In absolute terms, they will never eclipse Circle in revenue generation. The promoters will tout meaningless TradFi credentials in a bid to convince investors that they have the relationships and ability to disrupt the legacy banks in global dollar payments by partnering with them or using their distribution channels. The ruse will work; issuers will raise fuck tons of money. For those of us who have been in the trenches for some time it will be hilarious to watch the suited-up clowns that are able to hoodwink the investing public into investing in their dogshit companies.

After this first wave, the scale of grift is entirely dependent on the stablecoin regulation enacted in the US. The more freedom allowed to issuers in terms of what backs a stablecoin and whether they can pay yield to holders, the more financial engineering and leverage that can be used to mask a turd. If you assume a light to no touch stablecoin regulatory regime, then you could get a repeat of Terra/Luna in that an issuer creates some fugazi algorithmic stablecoin Ponzi. The issuer can pay high yield to holders and the yield comes from applying leverage to some holdings of assets.

As you can tell I have relatively little to say about the future. There is no real future because the distribution channels for new entrants are closed. Get that through your fucking muppet brain. Trade this shit like you would a hot potato.

But do not go short. These new stocks will rip the faces off of shorts. The macro and micro are in sync. As Chuck Prince, former CEO of Citibank said when asked about whether his firm was participating in Subprime mortgages said, “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 certain how Maelstrom is going to dance, but if there is money to be made, we will be making it.

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^[1] Jeremy Allaire is the CEO of Circle and Brian Armstrong is the CEO of Coinbase.