Due to blocked distribution channels, the founder of BitMEX cautioned that the majority of new stablecoin issuers will be overpriced and probably fail.
Arthur Hayes, the founder of BitMEX, cautions that a new wave of stablecoin businesses will attempt to emulate Circle's successful IPO but are more likely to fail.
Although Circle's IPO signals the start of "stablecoin mania," Hayes warned in a piece on Monday that the majority of newly listed public stablecoin businesses will be overpriced and fail.
"The listing is just the start of this cycle's stablecoin mania, not its end," he stated, adding that the bubble will burst following the public debut of a stablecoin issuer "that uses a combination of financial engineering, leverage, and amazing showmanship to separate fools from tens of billions of capital."
He stated that "circle copycats" will be the next wave of listings and advised investors to "trade this shit like you would a hot potato."
Do not short, cautions Hayes.
Hayes did not, however, go so far as to suggest that traders short the equities since the "stablecoin mania" storyline and pro-crypto attitude in the US will initially push prices upward.
He warned, "These new stocks will tear shorts' faces off."
On June 17, the US Senate will vote on important stablecoin legislation, which, if approved, would add gasoline to the fire.
On Tuesday, Chainlink co-founder Sergey Nazarov agreed, saying, "Stablecoin regulation in the US will kick off a wave of new stablecoins in the US and all over the world."
The likelihood of success for new stablecoins is low.
The main concern for any stablecoin issuer, according to Hayes, is how they will market their offering. Only three feasible distribution channels were found by him: legacy banks, Web2 social media behemoths, and cryptocurrency exchanges.
He stated that new stablecoin issuers have "no chance of success" if they do not have access to these channels.
He explained that the majority of new public stablecoin companies will be overpriced and fail because banks and social media companies will create their own stablecoins, new entrants will have to pay large fees to exchanges or give in to depositors, and distribution channels are already locked up by established players.
Circle (CRCL) is overvalued
According to Hayes, Circle (CRCL) is currently "insanely overvalued," and Coinbase receives 50% of its interest revenue. But its cost will "keep floating," he continued.
By the end of the trading session on June 5, Circle's share price had risen following a successful IPO.
According to Google Finance, CRCL has risen more than 80% since going public and peaked on June 16 at a little under $165.
