Why stablecoin stocks will boom, then bust: Arthur Hayes

Inspired by Circle’s blockbuster IPO, stablecoins will flood the stock market, but industry veteran Arthur Hayes warns most have little chance of success. Here’s why.

In his recent essay “Assume the Position”, Arthur Hayes, co-founder of BitMEX, explained that the “stablecoin mania” is just getting started, but many retail investors are likely to get burned.

Inspired by Circle’s stellar IPO, stablecoins will flood the market, Hayes says, with giants like Meta, X, and Airbnb jumping in, embedding their stablecoins directly into messaging, commerce, and payout systems. That’s great for tech stockholders, but bad for upstart stablecoin issuers who will be crushed by Big Tech’s scale.

More importantly, stablecoin issuers are in a weak position because their success depends entirely on its distribution channels. If a company can’t get its coin listed on crypto exchanges, integrated into social media platforms, or adopted by legacy banks, it won’t survive.

“… the only question you must ask yourself when evaluating an investment in a stablecoin issuer is this: how will they distribute their product? If they have no distribution, they have no chance of success. And if you can’t easily verify that said issuer has the access to push product through one or more of these channels, run away!”

Hayes believes that the stablecoin bubble will burst after a stablecoin issuer goes public and pulls in billions from unsuspecting investors by “using a combination of financial engineering, leverage, and amazing showmanship.”

“A very bankable charismatic individual will get on stage and spew all sorts of nonsense, wave his (most likely a male) hands to and fro, and convince you why the leveraged piece of dogshit he is selling is about to corner the multi-trillion dollar stablecoin total addressable market (TAM),” Hayer writes.

However, Hayes warns investors not to short stablecoin stocks just yet, saying, “These new stocks will rip the faces off of shorts.” Circle’s shares will also “continue levitating” in the near term, although Hayes considers it “insanely overvalued.”

“Trade this shit like a hot potato,” he cautions, referring to both Circle and stablecoin stocks, in general.