Rumours are spreading!
We are all expecting that another heavily leveraged cryptocurrency exchange will be the next crypto company to collapse. We might be wrong. Maybe another stablecoin is about to go down. Yes – I am talking about the rumours that USDC is in trouble. Just to be clear - there hasn't been any conclusive proof to support the statement that Coinbase and Circle may be encountering problems. If you ask me, I would have said that USDC (Circle) is in a far better position than its main competitor, USDT (Tether). But…
Circle (company behind USDC) refuses to go public.
In case you missed it, Circle wanted to go public (pretty big deal!) but decided against it. You do not change your mind unless you expect the public listing to be a total failure. By that, I mean, that their IPO would not attract investors. The usual reason is that the company is doing terribly. If we look at Q3 financial results: $274 million in revenue, $400 million in cash on hand, with just $43 million in profits, we can see that one of the largest players in the cryptocurrency market, they are indeed not doing as well as expected.
What makes me wonder is this: they have profit, and yet they decided against the listing. On one hand, yes, the profits are not that significant, but that can not be the reason to not list. The reason must be somewhere else – probably that they will earn even less in the coming months.
How Circle makes money?
Stablecoin issuer derives the majority of its revenue from the yields it receives on the US government debt holdings it keeps as reserves for USDC. Circle's revenue has grown in step with the Fed's increases in interest rates. However, as the cryptocurrency market continues to fall, the quantity of USDC in circulation has been declining. This indicates that Circle's income is declining. Perhaps the rate of decline is so fast, that they will be in deep reds by the end of the year – and have all seen, 400 million reserves in a crypto world is not a lot. How long can they survive?
What is my biggest fear?
Let's assume that they do go public. Their listing goes terribly and their shares a relatively cheap. By relative, I mean cheap for big funds or wealthy individuals. In this case, the Circle could be easily bought by our biggest crypto enemies – banks. Imagine one of the largest cryptocurrency player - USDC being owned by institutions against which the crypto community should stand.
Although many see this not listing as bad news, for me, it is good. Who needs listing on traditional markets anyway. This is crypto baby.
