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15 sats \ 15 replies \ @grayruby OP 21h \ parent \ on: Circle is wildly overvalued Stacker_Stocks
Why would they 10x when they have only gone up 9% in 4 years while Tether went up 94%? If the stablecoin market is 2T it is highly likely a lot of the volume is routed through the big banks.
Why would they 10x
The GENIUS act, if/when it passes is going to give preference to US-based stablecoin operators (which is USDC).
Look I think Tether may 15x and USDC may only 5x....but the point is 2028 is not far away, and even at 5x Circles valuation would not be that bad (a 5x may result in a PE of 2 or so)
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Hasn't impacted the flows into market caps so far.
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Sure but Deutsche Bank is exploring issuing a stablecoin. I am sure other European banks will too. We will see. Your nym fits because I think you are being optimistic for Circle's prospects.
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Why won't the banks create their own stablecoins? You are assuming all that market share goes to USDC. You don't think there will be other issuers. There is no moat to spinning up a token and buying treasuries with the USD you take in.
Also a 5x would increase earnings from 500M (assumed) to 2.5B which would be 10x earnings not 2x.
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Also a 5x would increase earnings from 500M (assumed) to 2.5B which would be 10x earnings not 2x.
You're right. Still in a collapsing fiat system a PE of 25 is considered "normal".
Why won't the banks create their own stablecoins?
I'm sure some will try. The funny thing though is are traditional banks capitalized enough? They cant simply print money, they need actual funds to buy 1:1 Treasuries to back their virtual USD.
The most curious thing (and least talked about, IMO) about GENIUS act is we are moving back to full reserve banking.
I suspect the next shoe to drop is that Tether and USDC will compete for clients by giving them a share of their interest earnings (assuming they are earning ~4.5% on their treasuries).
Therefore, I think the way the game will shape up is USDC or Tether will sign "exclusives" with large retail banks and offer them say 2% for the customers they onboard. The retail banks, being broke, will go for the easy-no-work-free cash.....
The retail banks are basically turning into front-end websites and Tether/USDC will be the actual banks.
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If they start to offer users a share in the yield it becomes a race to zero like brokerage fees and the entire business model becomes about AUM not profit. If they need volume to 5x now they definitely need it to 10x or more if they are sharing the yield. The more treasuries they hold the more risk. They are short term but even small changes in price at such a large market cap could put them at risk of the peg breaking.
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I'm actually surprised USDT hasn't started to domicile to the US yet and/or get listed as a public company.
Supposedly Cantor is their bank....so all their funds are already held by US custodian...so it should be pretty straight forward for them to at least create a Tether LLC somewhere and become a domestic company.
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I am sure they will have a US division at some point.
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They could have bought Circle outright if they wanted but now that it is public and massively overvalued it makes more sense to cannibalize their business.
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