A thread summarizing @CryptoHayes "Assume The Position" essay:
tl; dr: Distribution is EVERYTHING. New entrants face closed channels. Exchanges already own/partner with existing issuers. Social media & banks will build their own solutions in-house.
/🧵
He starts by breaking down the #Stablecoin market, emphasizing that crypto natives need deep knowledge of global fiat money movement, unlike traditional finance. He warns against the coming "stablecoin mania" and overvalued issuers /1
Early crypto adoption faced massive friction moving fiat, leading to scams. Exchanges devised workarounds like local agents or unlinked businesses for banking. All major crypto innovation, especially in stablecoins, came from Greater China. /2
Tether's ($USDT) rise was driven by bank account closures for exchanges & traders, and a strong Asian desire for dollars due to local currency instability. Bitfinex was a key early distributor, and Chinese trust cemented Tether's dominance. /3
The 2017 ICO boom solidified $USDT's product-market fit. Crypto-only exchanges, unable to deal with fiat banks, used $USDT for shitcoin/USD pairs. Binance, without direct fiat banking, used $USDT as its "banking rails". /4
By the decade's end, $USDT was the only scalable way to move dollars in crypto. Circle's $USDC, an American company, had a distinct disadvantage and partnered with Coinbase, paying 50% of its net interest income for distribution. /5
Web2 social media giants like Facebook (Meta) tried to enter with Libra in 2019 but were shut down by US political establishment protecting legacy banks. Now, companies like X, Airbnb, & Google are again discussing stablecoin integration. /6
Legacy banks realize stablecoins are "unstoppable," fearing massive revenue loss. However, their bloated structures and prescriptive regulations make it hard to adapt or use tech efficiently. Bottom up adoption is hard to stop. /7
Stablecoin issuance is "insanely profitable" due to Net Interest Income (NIM) from investing reserves, largely in T-bills. Tether, paying no yield to holders, captures the full NIM, making it "the most profitable bank per employee in the world." /8
The "narrative" of a multi-trillion dollar TAM, proven profitability, and potential US Treasury/Trump support (who dislikes big banks) is fueling investor "froth." /9
In closing, he warns: Circle is overvalued, but may hold value. The next wave of "Circle copycats" will be "even more overvalued," promoted by "suited-up clowns". Don't short, but understand the distribution reality:
Distribution channels are largely closed for new players.
//
1.83K
4
The content on this page is provided by third parties. Unless otherwise stated, OKX is not the author of the cited article(s) and does not claim any copyright in the materials. The content is provided for informational purposes only and does not represent the views of OKX. It is not intended to be an endorsement of any kind and should not be considered investment advice or a solicitation to buy or sell digital assets. To the extent generative AI is utilized to provide summaries or other information, such AI generated content may be inaccurate or inconsistent. Please read the linked article for more details and information. OKX is not responsible for content hosted on third party sites. Digital asset holdings, including stablecoins and NFTs, involve a high degree of risk and can fluctuate greatly. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition.