Circle’s IPO Ushers in Golden Stablecoin Era

Warren Buffett loves insurance companies because these business models generate money in two ways. First, when people pay for their policies, this creates a large pile of cash (called a float) that can be invested to show a return. Second, you write policies such that you’re highly likely to pay out less than people have paid in. The result is a profitable business provided you invest wisely and don’t take on too much risk. Turns out stablecoins offer a similar appeal without the need to hire any actuaries.

Crash Course on Stablecoins

Our recent video on the dangers of crypto wasn’t all doom and gloom. In fact, we believe the momentum behind institutional participation in cryptocurrencies – including the emergence of crypto ETFs beyond just bitcoin – means we ought to start paying attention to this space. Specifically, we want to follow the lead of institutional investors like ARK Invest which recently stated that, “stablecoins are one of the most transformative and high-growth sectors in the digital asset space.”

A stablecoin is labeled “stable” because it provides equivalent exposure to an underlying asset, largely U.S. dollars. Unlike most of the crypto coins that have ever existed, stablecoins typically have measurable intrinsic value. Over 98% of stablecoin market cap represents coins that are pegged to the dollar. One coin equals one U.S. dollar. Now folks in the crypto world can transact using the dominant global reserve currency. This begs the question. Why hold a coin that represents a US dollar when you can just hold a U.S. dollar? Well, because it’s much easier to transact across the crypto world when using stablecoins instead of U.S. dollars. Anytime you want to convert those stablecoins into dollars you can give them back to the provid