The Rise of Public Crypto, ICOs Make a Comeback, and Coinbase Wins Again – The Chopping Block - Ep. 850
🎯 Summary
Podcast Summary: The Rise of Public Crypto, ICOs Make a Comeback, and Coinbase Wins Again – The Chopping Block - Ep. 850
This episode of The Chopping Block focuses heavily on the explosive public market debut of Circle (USDC issuer), contrasting its success with the dynamics of other crypto entities like Tether, and touching upon the broader implications for public crypto investment vehicles and the resurgence of ICOs.
1. Focus Area
The primary focus is the public market performance of crypto-native companies, specifically the Circle IPO, the stablecoin landscape (USDC vs. USDT), and the resulting shift in investor sentiment towards regulated crypto infrastructure. Secondary topics include the regulatory environment for stablecoins and the general appetite for public crypto exposure.
2. Key Technical Insights
- Stablecoin Collateral Divergence: A key distinction is drawn between Circle’s commitment (or regulatory requirement) to high-quality, liquid collateral (like Treasuries) versus Tether’s more diverse and potentially “exotic” backing (including commercial paper and Bitcoin).
- Distribution Advantage as Moat: The discussion highlights that the massive revenue share Circle provides to Coinbase (for distribution) suggests that distribution channels are the critical moat in the stablecoin space, making it prohibitively expensive for new entrants to compete.
- DeFi as an Antidote: One brief technical mention suggests that DeFi protocols are viewed as an “antidote” to potential centralization risks or failures associated with centralized stablecoin issuers.
3. Market/Investment Angle
- Circle IPO Mania: Circle’s IPO experienced an unprecedented surge (250% two-day jump), indicating massive pent-up demand for pure-play public stablecoin exposure, leading to an initial valuation multiple (160x net income) that the hosts deemed “insane” compared to Coinbase (25x earnings).
- Tether Valuation Disparity: If Tether were valued at Circle’s multiple, it would be worth nearly half a trillion dollars, suggesting the market heavily discounts Tether due to its opaque structure relative to the regulated Circle.
- Crypto Treasury Fatigue: There is a perceived market fatigue or underperformance in the recent wave of Bitcoin treasury companies (like those following MicroStrategy), making Circle—a real utility product—more attractive to TradFi investors seeking crypto exposure.
4. Notable Companies/People
- Circle: The central subject due to its blockbuster IPO and massive valuation surge.
- Coinbase: Highlighted as the primary beneficiary of USDC distribution, reportedly earning more revenue from the USDC float partnership than Circle itself.
- Tether (USDT): Discussed as the primary competitor, whose potential exit from the US market (due to regulatory compliance) could further inflate Circle’s perceived value.
- Vicky Foo (Former Circle Employee): Quoted for her perspective that controlling the digital dollar is akin to controlling “monetary policy,” justifying the high valuation relative to payment giants like Visa and PayPal based on volume controlled.
- Arthur Hayes & Omar (Drive and Fly): Mentioned as figures who were previously negative on the Circle IPO due to its high overhead and regulatory encumbrances.
5. Regulatory/Policy Discussion
- Stablecoin Legislation (Stable Act/Clarity Act): The impending US legislation requiring high-quality collateral is a major factor. Tether has threatened to exit the US market if these acts pass, as compliance would require a fundamental overhaul of their collateral structure.
- Market Segmentation: The regulatory environment is expected to segment the stablecoin market into three domains: Onshore (Circle/USDC), Bank Consortiums, and International (likely Tether).
- Regulatory Burden: Circle’s status as a US company means it is more susceptible to lawsuits and regulatory oversight (e.g., freezing funds for bad actors), which is seen as a burden compared to offshore issuers like Tether.
6. Future Implications
The success of the Circle IPO signals that investor appetite for high-quality, regulated crypto infrastructure is far greater than anticipated. This will likely expedite IPO plans for other crypto companies (Gemini, Kraken). The market is moving toward a segmented stablecoin ecosystem driven by regulatory compliance and distribution power, rather than a single dominant player. The hosts also briefly signal a pivot to discussing the resurgence of ICOs and the dynamics of crypto treasury companies in subsequent segments.
7. Target Audience
Crypto and Fintech Professionals, Institutional Investors, and Venture Capitalists interested in public market dynamics, stablecoin regulation, and the valuation metrics of crypto infrastructure firms.
🏢 Companies Mentioned
💬 Key Insights
"With Strategy or any of the crypto treasury companies, it's actually different than that, right? The downside across all Bitcoin companies is almost more uniform. There's actually less esoteric weird company risk that you have to underrate, right? Has nothing to do with the company itself. The company is a shell. The company is a holding pot or a box, you know?"
"What I think it incentivizes is companies to take on more leverage. And if you squint, you know, the crypto treasury company strategy looks like a levered ETF."
"Critics have started to warn that maybe this is this cycle GBTC. Maybe this is GBTC, very famously known as the Widowmaker trade that led to the collapse of 3AC and implicitly through BlockFi and a bunch of the lending companies in crypto back in 2022."
"When you control money, if she wins, you're not in Fintech anymore. You're in monetary policy."
"People kind of in the security space complaining about the fact that when there's kind of like bad actors using USDC, Circle will not freeze the money because since they are a US company, they can be sued much more easily than Tether."
"Tether has said that if this passes [Clarity Act], that they will basically pull out of the US market because one of the provisions... is that you can only have high-quality collateral backing your stablecoin, such as, you know, short-term treasuries."