‘Trade This S–t Like You Would A Hot Potato’

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A stablecoin mania is brewing in public equity markets, according to BitMEX founder and Maelstrom investment chief Arthur Hayes.

Hayes on Monday said the public listing of USDC stablecoin issuer Circle (NYSE:CRCL) marked the beginning of this bubble. And that company’s stock is already overvalued, he said.

In just nine trading days, Circle’s stock has surged over 140% from its opening price and over 435% from its listing price, boasting a valuation of $36 billion at last look. The impressive debut comes amid a growing buzz around stablecoins.

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From the prospect of greater legitimization in the U.S. to the U.S. Treasury’s projection that stablecoins could grow to a $2 trillion market, investors have several reasons to be optimistic about the sector, which is arguably already the most profitable blockchain business vertical.

But Hayes calls for caution as more companies predictably appear on the scene.

In Hayes’ telling, the stablecoin market is already divvied up.

“There is no real future because the distribution channels for new entrants are closed,” he said.

Hayes said stablecoins only succeed if they can affordably reach millions of users. According to him, there are only three channels through which this can happen. These channels are cryptocurrency exchanges, social media giants and legacy banks.

Cryptocurrency exchanges already own stablecoins or are partnered with market leaders Tether and Circle, Hayes said. At the same time, he said social media giants and legacy banks showing interest in the space as the regulatory climate improves are unlikely to partner with third parties.

Social media giants have the most customers and almost complete information on their behavior and preferences, he said, noting that they are well-positioned to lead the sector.

For legacy banks, he said, “regulators might likely forbid” such third-party partnerships.

Hayes says that new entrants will crop up despite this lack of distribution, lured by the profit potential of becoming a stablecoin issuer, but warns that they will eventually leave investors holding the bag.