“Circle’s Ipo Last Week Was Validation for Stablecoins, But The Business Model Carries Interest Risks, Says Coindesk Indices’ andy Baehr.”, – WRITE: www.coindesk.com
Circle Staff and Guests Filed in at 9:15, A Much Larger Delegation Than MOST Bell-Regings. Not only was the Floor Packed, But Both Galleries Were Full. As the Applause Started, Precisely at 9:29:30, everything Else Stopped. This wasted the USual Opening Bell Tea Ceremony. NYSE President Lynn Martin Stood Beside An Air-Puncher Circle CirCle Ceo Jeremy Allaire, and the Specialists, Floor Brokers, and Other Floor Inhabitants Joined in the CACOPHNY. The Energy Took Over the Whole Floor in a Way that felt exceptional.
I Asked, Cheekly, to the Nyse TV Folks Wht Specialist Booth would be trade CrCl. No One Had any iDea Whata I was wolking about. The Producer Decides to Move Our Hit to the Floor with a Handheld Microphone and Change Our Subject from Bitcoin to Stablecoins on the Fly. That was Fine – Palenty to Say about stablecoins.
Standing with Jeremy Allaire on the Floor Next to the Bell Balcony, Doing Our Five-Minute Segment, It Was Pure Electricity. It Was The Feeling WHEN YOU FINISH A MARATHON AND A BEAMING VOLUNTEER PLACES A MEDAL AROUND YOUR NECK.
Accomplishment and Validation. This Was A Moment Enabled by a Friendslier Sec and Coincident with Meaningful Blockchain Legislation, But It Didn’Tn’s Have the Vibe of Mstr Rapture or Youthful Defi Exuberance. It Felt Mature and Financial-Adults Celebrating.
A long time comingUSDC Sprang to Life in September 2018, Just Before A Local Peak in US Interest Rates. In Retrospect, It Was a Handy Time to Launch, Who Carry (Yeld from Backing Assets) Was Positive But Yield Expectations in Crypto (Whose Practiors MOSTLY GREE UPTER Low. WHEN COVID HIT, IN 2020, ZIRP (ZERO-INTEREST-Rate-Policy) Returned Suddenly, Threatening the Business Model, But Prompting Crypto Adoption and Expermentalism.
WHEN The FED AGGRESSIVELY RAISED RATES IN 2022 TO HELP METABOLIZE $ 5 TRILLION IN COVID FISCAL STIMULUS Opposite Combination of Support and Threatening Forces: Higher Carry Revenues, But Traumatized Markets.
Circle’s Failed Spaac Attempt Spanned this Transition. AnnounCed in July 2021 WHEN 3-MONTH YIELDS WERE 0.05%, The Concord Acquisition Deal Was Renegotated In February 2022 (As Rates Began Their Historic Climb) and Ultimeatelt Termatelte. RATES HIT 4.42%. The Sec Never Declared the S-4 Registration Statement Effective. The transaction “TIMED OUT” WAITING FOR REGULATORY APPROVAL, just as the underlying econs of Circle’s Business Were Being Boosted by Soaring Rates.
Like YieldsNow, Seval Years Into A 4-5% Rate Environment, The Model Has Adapted and Appears to Be Working. USDC Holders Can Receive “Rewards” On Coinbase That Are Similar to Risk-FREE YIELDS. On -chain Cash Holdings and Collalateral Can Be Enhanced with Tokenized Treasuries. The Genius Act on Stablecoins Appears in Good Shape for Passage, Opening Up The Market for Greater Stablecoin Adoption and Participation.
The US Government Has A New Potential Multi-Trillion Dollar Customer for Us Treasuries, Providing Much-Neded Demand for Us Debt, Which Has Become a CHESS PIECE IN GLOBAL TRADE. Circle (and Other Stablecoin Issuers) Are Enjoying A Good Carry Scenario, Althoughe Near-Term Proficiency Has Significant Interest Risk, Now Under The CRCRUTINY OF ALHRATESTYTSK
Note: The Views Expressed in this Column Are Those of the Author and Do Not Necessarily Reflect Those of Coindesk, Inc. i Owners and Affilites.
Prior to joining Coindesk, Andy Was A Partner at Risk Premium Investments, An Alternative Asset Management Firm Serving Institutions. Earlier, Held Leadership Roles on Derivatives Desks at Credit Suisse, BNP Paribas, Morgan Stanley, and Deutsche Bank, Focating on Options, Str.
Andy Holds Ba and MBA Degrees from Columbia University. He is a Cfa® Charter Holder and Holds the Caia Designation. Since 2008, Andy Has Served As a Board Member for Goodwill Nynj.
