Backstage Pass: The Bitcoin Difficulty of stablecoins
Tether, Fidelity, Circle // Kansas Reserve // Bitcoin Difficulty eases // Many bears, permabull // NFTs? B(I)RB // HesabPay
Housekeeping: I’m going to turn on monetization February 1.
Eleven years ago this week, bitcoin was $253.
The 11th largest cryptocurrency was dash.
The 111th was unattainium.
Stablecoins gone wild
This week saw the launch of Tether’s made in America stablecoin, USAT, and the announcement of Fidelity’s forthcoming Ethereum-based stablecoin, FIDD.
You see: Bull case for stables.
I see: Rough year ahead for Circle.
Let’s go to the boards! In the third quarter, Circle posted over $700 million in revenue. Meanwhile, Tether’s out there buying a ton of gold every week out of its petty cash.
But see the thing is it isn’t just Tether that Circle is getting owned by. It’s also Coinbase. It’s still giving Coinbase half the money it earns on USDC reserves. That’s a big part of why its profits look like such weak tea considering it has $72 billion in reserves earning yield.
As it stands, Circle looks set to be toast as soon as the GENIUS Act is fully effective in the U.S. (which will be the end of next January, at the latest).
Between the big banks inevitably rolling out their own stables and the world’s actual most important stablecoin issuer, Tether, landing on U.S. shores, Circle is caught between a jocular Italian and a wealthy bald man who seems to be some kind of strategic savant, all without enough runway to even come close to taking on [checks notes] every giant financial firm on Earth.
Like, OK, the banks aren’t gonna launch their own stables. They are all just gonna use USDC. 👌
I don’t think Circle has a hope of even being the Dr. Pepper to Tether’s Coke and the Bank of Whatever’s Pepsi. I don’t think it will even be the Mr. Pibb! If it’s lucky it can persevere as one of those supermarket brands in brown-purple cans with names like “Mr. Cool” or “Dr. Pepe.”
And that’s my Circle bull case: the store brand of stablecoins. Vaya con Dios, Jeremy! Y’all never should have sank the CENTRE Consortium — it was prescient!
On the bright side, this is an industry where you can show up second, come out last and still cry atop a billion dollars in a Four Seasons suite. The Circle guys will still have boat money.
But as long as we’re on about it, I’d be happy to run an idea into the ground for a few hundred million. Hell — I’d do it for a $10 million. I’m easy like that. Does anyone need me to play third string to something? I’ll make it look like a fight, baby.
I’ve been a journalist for eleven years now. I don’t have any pride left.
This is my rifle, this is my gun
Tomorrow, the Senate Agriculture Committee will vote on a handful of amendments and the actual Clarity Act. If it passes, that will mean that one of the two committees that need to act to get it to the floor will have acted.
Looks like the vote this time is likely.
And, huh! It just so happens that Fairshake, the mega crypto PAC, put out word to every political reporter this week that it has $193 million in cash on hand for the midterms.
Look, I don’t know anything about intimidation. You learn intimidation in high school sports, I think, but I did Debate. We thought it was intimidating if you could spin a pen around your finger while looking all chill.
I don’t think it worked, but we all put a lot of time into learning how to spin that pen. My point is: I might not have the greatest judgment on intimidation. Fair? Fair. OK.
But yeah I bet $193 million is a little bit intimidating. People know that Clarity doesn’t do that thing that a lot of PACs do where it just always supports one part or the other.
No, if you let FairShake down, it takes you down.
So on the off chance that Clarity actually manages to return to the House and get a vote before the midterms, those $193 million will be dollars on the minds of House members casting wary votes.
☎️ 🔊
“Hello?”
“Do you like scary movies?”
KansasCoin
As it happens, the state where I hang my hat these days, Kansas, was a major consideration going into tomorrow’s Ag committee vote. Sen. Roger Marshall has been trying to get credit card reform passed and he’s tried to amend it onto every big bill that came along.
He was all set to try again on Clarity, which would have gummed up the works badly. It would have been Ag’s own little yield fight. But Marshall backed off.
As it happens, that’s not the only way in which Kansas has factored into salient crypto conversations.
Sen. Craig Bowser, a Republican whose district covers the northeast part of the state, the land beyond Kansas City, has put forward two crypto bills. One on a strategic crypto reserve made from abandoned tokens. You know what they say about this Bowser guy, right? Business on the streets, a freak in escheats.1
The other bill would require that crypto donated to Kansas campaigns pass through a platform that has anti-money laundering controls built in.
That’s fair because you would not believe how much Al-Shabaab cares about who gets elected to the Kansas legislature! It’s crazy! Those guys are all up in the Topeka Capital-Journal — every day.
Seriously, campaign KYC is good policy. We do all want money to be free and everything, but at this point most of us would take anything that even resembles campaign finance controls.
Bitcoin’s easy button
Bitcoin Difficulty has been dropping since November. In fact, in absolute terms, it has been one of the most severe drops in Bitcoin history.
What this means, to an extent — at least, is that Bitcoin miners are turning machines off, maybe switching over to AI.
Bitcoin mining secures the network. Many argue that miners define bitcoin’s value, so it’s not great that Difficulty is dropping. It’s worse that the fall has done little to change the profitability of mining.
Remember when everyone was playing in Settlers of Catan in the early 2010s? It was so popular that you could buy t-shirts that said, “Nobody wants your sheep” and strangers got the joke.
But the fad faded, so only the best players were still playing, making it both harder to find a game and harder to win.
Same, same. In Bitcoin mining there is now less competition, but the opponents remaining all have knives.
That said! It’s probably not all quitters! Some of it is probably just retiring the most run down machines! And some of it is definitely demand response, because there is snow in Texas.
Still, feeling a little wintery, on chain and off.
Et tu, altcoins?
Want an easy engagement hack on any corner of social media that’s thick with the cryptoletariat? Write something about how “you’ve never seen the sentiment worse than this.”
That’s hot content right now.
But Messari-alum Ryan Watkins, now of the hedge fund Syncracy Capital, dropped just the opposite take last Thursday.
Yes, he writes, the easy money era is over. Don’t look for another general alt-coin season. Some coins thought of as alt-coins will have a bright future, but they will have a bright future because they have teams that deliver, not because the narrative moves in their favor.
This is like that guy who keeps getting girlfriends because he’s just good looking enough that when he hangs out at readings and talks about writing a book, it gets him phone numbers. But then he actually falls for someone and they are together for a while and she says, “How come I never see you writing that book?”
If you listened to my podcast about the success so far of real world assets and their likelihood to go exponential on-chain, you know I think incredible times lie ahead for one or two blockchains.
Well, former crypto journalist and now head of growth at The Block, Tim Copeland, wrote one of those engagement farming “feels bad man” posts on X.
But one of his readers, very reasonably, replied (paraphrasing), “Sure, but the tokenized stocks are coming. LFG.”
To which Copeland answered (paraphrasing), “But muh bags.“
Mama said there’d be takes like this.
It’s not really hard to work out how massive flows coming on chain will cause a lift to the sector, not just stonks.
Yes, the next phase or RWAs probably won’t get your DOT out of the dumps, but did you consider: DOT is priced as it always should have been? And it’s headed in the right direction?
On the other hand, an RWA boom could be good for — say — Ethereum. Could be real good!
Where did Fidelity say it was running that new stablecoin again, by the way? Right.
Or, as Watkins put it:
It’s reasonable to be skeptical, but don’t be cynical.
...
Because through the fog of disillusionment and uncertainty, lies the opportunity of a lifetime for those willing to bet on the new era’s sunrise, rather than mourn the old era’s sunset.
$BIRBs aren’t real
The crypto-Substack, Mirror, got sold to Paragraph a while ago (which is also basically crypto-Substack). Social networks Farcaster and Lens both announced they were acquired. And Foundation also got acquired, just this week.
In other times, acquisitions are validation, but these looked a lot more like surrender.
It’s like when that boss you couldn’t stand gets moved to a new department of one and they tell everyone how excited they are about “the new opportunity” while someone 20 years younger takes over their spot. Ooph.
Clearer example: NFT marketplace, Nifty Gateway, will just shut down.
There was this flickering moment in 2021 when it looked like blockchain rails could open up fresh new flows of sustainable capital to lots more creative types (Lots of face piercings at EthDenver that year).
But it feels like crypto has decided it is only for finance now. Finance is quadrillions of dollars. There’s a lot of rent getting paid in Midtown if some of that sloshes on-chain.
However, some of us like this scene’s weirdness! We’d miss it!
Well, Orange Cap Games came out this week and said, “Hold my BIRB.”
The company acquired Moonbirds from Yuga Labs in the middle of last year. This week, it announced the BIRB token, which will be distributed overwhelmingly to members of its Moonbirds NFT community.
This follows on the “Birbillions Thesis,” the team dropped two weeks ago. For a manifesto about marrying the absurd with profitability, there’s a lot of business-speak in this. For example, “The Pareto-optimal outcome is collaboration between OCG and the major industry players.”
Somebody close that guy’s laptop and get him on the water slide.
This BIRB thing? Staking-but-call-it-”nesting” is not blowing my mind.
But I also learned from the thesis that Orange Cap has actually made a paper and digital card game that I guess, they say, is selling well and has decent distribution. If folks get pumped about these freaking birbs doing something on screens or on tables, that could be a vibe.2
But, I hate when journalists write about “could.” So I also just slapped myself.
We’ve seen apecoin, PENGU, FLOW, MANA, ronin, freaking illuvium! NFT coins are redder than Oklahoma!
On the other hand: Several social networks rose and crashed before Zuck made Facebook stick. Sometimes the world’s just not ready.
Fool me once, shame on you. Fool me twice, shame on me. Fool me with BIRB and Spencer Gordon-Sand is a kajillionaire?
Announcement: Because I like culture, I have decided that I’m watching this thing and documenting it as it goes. This is going to be a story. Orange Cap could be the next Nintendo but it could also be the Lieutenant Hiroo Onoda of digital art.
Dammit I just wrote “could” two more times!
Nice ladies with farms
The New York Times has written a glowing profile about the use of stablecoins to deliver aid in Afghanistan, via the global NGO Mercy Corps (which you may remember from Facebook’s Libra days).
Nice ladies with farms get aid money quickly and verifiably using blockchain technology. Economies grow.
It’s a good story. I like the story. I also know that Angus Berwick is over at the Wall Street Journal seething over it. I bet he’s making calls to find sources that can prove how afghani stablecoins are bad — actually.
And when he writes it, Elizabeth Warren will be so happy and she will send it to all her friends. It doesn’t even need to be right.
Everyone who writes things likes it when readers send things to their friends! Did you like this? Send it to your friends!
😊 See you on Sunday for the next Diamond Rhino pod (I’m excited about this one — hint: Network states!) and then on Tuesday with a full, fresh report.
Google it. This is an excellent gag.
Also that card game has “tapping” but they call it “flopping,” as if Wizards of the Coast isn’t going to notice.
Sharp take on Circle's positioning problem. The GENIUS Act window creates a brutal pincer for USDC between established finance and Tether's scale. That Coinbase rev split detail is telling, basically means Circle's been paying rent to exist rather than building a moat. I think the storeBrand analogy is spot on, these market dynamics play out the same way regardless of whether we're talking soda or stablecoins tbh.