- There’s about to be a boom and bust of new publicly listed stablecoin issuers driven by the recent success of Circle IPO, says former BitMEX CEO Arthur Hayes.
- Hayes believes most of these stablecoins will eventually fail, crowded out of the market and deprived of distribution by stablecoins issued by Web2 giants such as Meta and AirBnB.
- Despite his prediction that most new stablecoin issuers will fail, Hayes doesn’t recommend shorting these companies and instead advised his readers to trade them carefully.
Provocative crypto commentator and former CEO of BitMEX, Arthur Hayes, believes stablecoins are set for an explosive boom and bust cycle spurred on by the recent success of USDC issuer, Circle’s, initial public offering (IPO).
“The reason why I’m writing another missive about stablecoins is because of the blow out success of the Circle IPO,” Hayes wrote in the recent Substack post titled ‘Assume the Position’.
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.
Arthur Hayes, former BitMEX CEOHayes predicted that many retail investors will be burned by investments in Circle and other copycat companies as the enormous stablecoin IPO bubble inevitably bursts.
The former BitMEX CEO said after witnessing the Circle IPO, large Web2 firms like Meta and AirBnB will pour into the space, launching their own stablecoins and embedding them into their social media, direct messaging, e-commerce and payments platforms.
According to Hayes, this will help drive up the share price of these companies but it’ll make it hard for newly launched stablecoin issuers to get a foothold in the market as the stalwart tech giants opt to use their own stablecoins.
Related: Rocket Ship Incoming: Arthur Hayes Sees Ethereum Blasting Off to $15K
Distribution Channels Hamper New Entrants
Hayes argued that this lack of access to distribution is what will cruel the chances of many of these soon-to-launch stablecoin issuers.
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.
Arthur Hayes, former BitMEX CEOHe warned investors, “…if you can’t easily verify that said issuer has the access to push product through one or more of these channels, run away!”
To further illustrate this point Hayes notes that many of the founders of the world’s largest stablecoin, Tether (USTD), are the same people behind the cryptocurrency exchange BitFinex. This connection gave the stablecoin a crucial large-scale distribution network from the start and a ready-made user base of millions.
Circle itself has also sought out a partnership with a crypto exchange, striking a deal with Coinbase in order to increase the distribution of USDC. According to Hayes: “the deal is that Circle pays 50% of its net interest income to Coinbase in exchange for distribution throughout the Coinbase network.”
Stablecoin Bubble Bursting Will Cost Investors Billions: Hayes
Hayes argues the stablecoin bubble will eventually burst when retail investors lose big on a publicly listed stablecoin issuer:
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.
Arthur Hayes, former BitMEX CEOHe said these losses will be the result of investors not understanding “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.”
Despite his prediction that the coming stablecoin bubble will burst catastrophically, Hayes doesn’t recommend shorting Circle or any of the other stablecoin companies that go public in the near future. “Do not go short. These new stocks will rip the faces off of shorts. The macro and micro are in sync.”
Related: JPMorgan Files Trademark for ‘JPMD’ Web3 Project, Sparking Stablecoin Speculation
Instead, Hayes recommended trading these stocks very carefully, advising his readers to “trade this sh*t like you would a hot potato.”
While he thinks there’s money to be made in the short-term trading of these stocks, Hayes believes new entrants into the stablecoin space are very unlikely to succeed in the longer term: “There is no real future because the distribution channels for new entrants are closed. Get that through your f***ing muppet brain.”
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