On Wall Street, Tether, Circle Internet Group (Circle and Stock Name CRCL), and Coinbase (COIN) are the top three companies related to stablecoins. Wall Street and the investment industry believe that Tether, the No. 1 stablecoin share, is sticking to unlisted companies (before listing on the stock market), and a huge amount of money is focused on the second-largest circle.
Coinbase is a stock whose stock price rises together with Circle’s recent listing on the stock market. Because I share profits with this company. Stable coin means ‘stable’ (stable) coin like the English name. Currently, it is linked to underlying assets such as dollars and has a one-to-one value.
Recently, the US government is about to pass the “Genius” (GENIUS) Act, which incorporates such stablecoins into the formal financial system. As a result, Western ants interested in U.S. assets have recently been buying circles intensively. However, since the stock price level is so overvalued compared to the assets held, extreme stock price volatility is expected to be difficult to avoid.
West Ham Ants Show More Than Twice Affection Than Palantir
According to the Korea Securities Depository, Seo Hak-ant’s best stock based on net purchase settlement for the last week (June 14-20) is a circle. Bought $91.65 million (buy-sell) during the period. It also bought more than twice as much as Palantir (net purchase of $40.22 million), which has emerged as a preference for Western scholars after Tesla.
Circle is a freshman listed on the U.S. stock market on the 5th of this month. The timing of the listing was exquisite. The U.S. Senate recently passed the Genius Act. This is a bill that states that private companies can issue stablecoins if they meet certain regulations and requirements. Stablecoin issuers such as Circle must have a certain amount of reserves, such as U.S. government bonds, and undergo a monthly audit.
Circle issues a stablecoin called USDC. USDC was launched in 2018 and ranks second in market capitalization after Tether. The position of the first and second largest issuers is so strong that the two companies have divided the world so far.
Here’s the profit model for stablecoin. When a customer deposits dollars, the circle sends the same amount of coins to the customer’s account, and the deposit received makes a profit by investing in financial products such as bonds. It is similar to existing investment banks in the United States. Therefore, as the market capitalization of the circle increases, the stronghold of traditional financial companies (legacy) is expected to be broken.
A Wall Street official said, “U.S. customers believe that coin transfer fees are attractive because they are cheaper than regular bank fees and that they can transfer money 24 hours a day.” In Korea, bank fees are already free and transfer is possible 24 hours a day.
The listing of the circle drew attention from investors around the world. This is because the second place (circle) made its debut in the stock market before the first place in the monopoly structure of Tether and Circle. In addition, Tether is a Hong Kong-based company with Chinese capital behind it. Circle is focused on U.S.-China capital, leading to a confrontation between the U.S. and China in the stablecoin market.
From the demand forecast, Circle has been in demand, exceeding the existing offering price range of $27 to $28 per share. It recorded oversubscription of more than 25 times the supply volume. The stock price, which started at $31 in the offering price, jumped more than seven times to $240 as of June 20.
Coinbase reflects interest income generated by depositing or operating USDCs stored on its platform as profits in the company’s books. Coinbase is a structure that makes money as the usability of USDC increases. Recently, it also announced a new merchant payment solution that helps e-commerce companies receive payments with stablecoins. Coinbase shares also rose 19% in the last month (May 21 to June 20).
Tether’s Listing, Overvalued, and U.S. Regulatory Risks Are 3 Variables
The biggest variable that will hold back Circle shares is Tether. Tether is an “absolute strong” with a 60% share of the stablecoin market. As Circle’s market capitalization grows, pressure on Tether to be listed is also expected to increase. If Tether goes public, it is observed that the amount of money concentrated in the circle will be transferred to the top company (Tether).
So far, Tether’s CEO has stated that he has no intention of going public. After Circle’s listing, CEO Paulo Ardoino drew the line on his SNS, saying, “There is no reason for Tether to make an initial public offering (IPO).”
Wall Street analysts interpreted, “Tether’s strategy is to stick to decentralization while holding Bitcoin and gold, so there will be no interest in IPOs for the time being.”
In the short term, the issue of overvaluation is a concern for circle investors. Currently, the relative indicator that can be compared with ordinary stocks is the stock price net asset ratio (PBR). It refers to the stock price level compared to the book value of various financial assets. Circle has a PBR of 71.78 times (based on Yahoo Finance on June 20), despite its huge holdings in U.S. government bonds.
It is more than 10 times higher than the PBR 7.5 times of Coinbase, which makes money with a similar structure. Coinbase is also evaluated as being overvalued. It is also higher than Palantir (59.74 times), an ultra-high valuation stock.
The regulatory situation can change at any time. The reason for the U.S., which is currently inducing stablecoins to the institutional sphere, is that coin issuers are huge U.S. government bond holders. They are maintaining the price of U.S. bonds to some extent by buying bonds.
Some analysts say that even if the Senate-led Genius Act is passed, the U.S. House of Representatives is preparing a separate bill, so there is still a long way to go. A Wall Street official said, “Both the Senate and the House of Representatives are in a position to ban interest-type stablecoins for consumers, so it is difficult to say that this market will grow indefinitely.”
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