Author: Gelong
This morning, I saw that Circle, the first stock of the popular hot chicken stablecoin in the US stock market, plummeted by 15%. I immediately asked a friend because he sold a put option expiring on June 27th, and the price last night was shocking.
Yesterday, Tianfeng Securities in A-shares had a transaction of 11.6 billion, repeatedly breaking and closing the board, with intense bull and bear battles. The leading brother, Guotai Junan International, which stimulated this wave of securities firms, plunged nearly 15% yesterday. The large army of bulls in these stocks will likely be anxious tonight.
What exactly is a stablecoin? Is it just a wave of hype, or a future trend?
A stablecoin, as the name suggests, is a coin with a relatively stable price. Like Bitcoin, it belongs to cryptocurrencies. The difference is that its price is pegged to a stable asset. Generally, stablecoins are divided into four types, with fiat-collateralized being the largest.
To give a simple example, if you give Circle 1 million dollars, Circle will mint USDC worth 1 million in your wallet. The USDC it issues must be collateralized by its owned assets, which are generally fiat currency (such as US dollars) or short-term US Treasury bonds.
Because of this 1:1 pegging, stablecoins like USDC have basically achieved price stability. Of course, it can also have short-term significant drops, such as in March 2023, when Circle had 3.3 billion dollars deposited in Silicon Valley Bank, which suddenly closed, causing market panic. USDC once dropped to 0.88-0.92 dollars. However, it recovered its peg within two days because the Federal Reserve and FDIC guaranteed full depositor compensation.
Many people might wonder why they would give Circle 1 million to exchange for an equivalent stablecoin. It's worth knowing that Circle does not pay interest on the 1 million you give (the latest "genius" law in the US explicitly prohibits it from paying interest), but it can immediately use this 1 million to buy short-term US Treasury bonds and earn interest income. It's essentially getting free, interest-free funds - how could such a good deal exist?
This relates to the trading of cryptocurrencies like Bitcoin. Before stablecoins, users wanting to buy Bitcoin could only use fiat currency, and the conversion between fiat and Bitcoin had to go through banks, which was extremely difficult, slow, and expensive at the time. Bitcoin buying and selling had to wait for buyers to prepare money, and coins could only be released after money arrived, with extremely low efficiency. Meanwhile, the trading infrastructure was immature, with significant price differences for BTC across exchanges, lacking a middle bridge for cross-platform arbitrage.
This led to poor liquidity in early cryptocurrencies like Bitcoin. Stablecoins emerged to meet this demand, with their core significance being to break through the liquidity barriers of cryptocurrency trading. They can be quickly matched on the same exchange platform as Bitcoin and can quickly transfer funds across chains and exchanges. Additionally, stablecoins have the benefit of protecting digital currency investors' privacy. After stablecoins appeared, they essentially built an isolation barrier between Bitcoin and bank accounts, blocking sensitive information association.
So everyone can see that the scale of stablecoins basically develops in sync with Bitcoin's price. The higher Bitcoin's price, the more it stimulates Bitcoin's expansion, attracting more people to participate, thus stimulating more stablecoin demand.
It can be said that stablecoins emerged from the trading needs of cryptocurrencies like Bitcoin.
At this point, you might realize a problem. We now want to create a RMB stablecoin, and we may not lack technical infrastructure, but we lack scenarios - what would I do with a RMB stablecoin? A small association: when Nvidia's graphics cards choke our necks, tracing back to the root cause, we might find it's possibly due to the butterfly effect of banning games back then. In the future, if the development of RMB stablecoins lags far behind, the reason might be traced back to the 2021 ban on cryptocurrency trading.
If stablecoins only remain at the trading needs of cryptocurrencies, it doesn't matter whether we do it or not - such evil capitalist speculative trading is better left undone. However, the application of stablecoins in another scenario suggests they might reshape the future global monetary system.
This scenario is cross-border payments. Stablecoins can serve as efficient settlement tools, supporting cross-border transfers and instant low-fee online shopping transactions. Because they are based on blockchain technology, transaction parties interact directly through wallets, without intermediary levels like correspondent banks and clearing institutions in traditional financial systems. Settlements can be completed in as fast as 30 seconds with fees controlled between 0.1%-1%. In contrast, banks take hours to days and require an average comprehensive handling fee of 6%.
A high-efficiency, low-cost tool replacing a low-efficiency, high-cost tool is just a matter of time.
Everyone can imagine that if stablecoins extensively penetrate the cross-border payment field in the future, whoever's stablecoin usage is large will hold the discourse power in the monetary system. Currently, by currency type, US dollar stablecoins almost occupy the entire share. As of June 8, 2025, US dollar stablecoins occupy 99.8%, with euros at 0.2%.
Contrary to some people's propaganda, stablecoins have not weakened the US dollar. US dollar stablecoins will greatly enhance the dollar's status, not the opposite. In this world, many countries' currencies are like poop, and US dollar stablecoins provide their residents with another choice - obtaining dollar-level assets, enjoying stability, without worrying like they would with Bitcoin (if Bitcoin rises, you feel losing when paying with it; if it drops, your assets shrink).
From this perspective, domestically we will definitely go all out to develop RMB stablecoins. Without the cryptocurrency trading scenario, it's uncertain whether we can succeed, but we must pursue and chase it. And isn't this pursuit exactly what A-share investors love most?
So stablecoins will be a continuous major theme. In the short term, Circle's crash indicates a need for correction. Circle's crash is purely due to valuation. The total market value of USDC issued by Circle is around $61 billion, while at its peak stock price, Circle's total stock market value exceeded the USDC market value.
Do you know what this means?
As I mentioned earlier, Circle's business model is issuing USDC and getting a free, interest-free fund to earn interest income. This is even more comfortable than banks, which still need to pay deposit interest. A market value exceeding USDC value is like ICBC's market value exceeding its deposits. ICBC's deposits in the first quarter of 2025 are the latest at 36 trillion - imagine an ICBC with a 36 trillion market value, how exciting!
So, after a round of speculation, a plunge is very normal, and it will definitely rise again later.
