Analyst: Yield Will Disrupt the Tether/Circle Stablecoin Duopoly

Nic Carter believes that, given the new opportunities and realities in the stablecoin industry, the market is set to expand and empower new actors. He points out that yield will be one of the disruptions powering this expansion.

Analyst: Yield Will Push a Stablecoin Explosion Disrupting the Current Duopoly

Things are starting to change in a stablecoin market that has traditionally been dominated by two powerhouses, Circle and Tether, which have concentrated a significant portion of the market capitalization of these assets.

Nic Carter, co-founder of Castle Island Ventures, believes that one of the factors that will contribute to disrupting this duopoly is yield, which will bring new actors to the stablecoin arena. With the current arrangement, there is no way for protocols to offer yield to their users, as Tether doesn’t offer yield programs, and protocols must negotiate with Circle, which also gets a cut.

Carter argues that this disincentivizes the usage of these widely extended tokens, as middlemen cannot capitalize on their customers’ funds. “If you are a crypto exchange with $500m in USDT deposits, Tether is earning around $35m/year on that float, and you’re getting nothing,” he stressed, pointing out that migrating user funds to their own stablecoins is a solution for this.

Part of this shift is related to the surge of new white-label product offerings that cheapen the costs associated with these operations. “If you wanted to issue a white-labeled stablecoin, you had to be able to afford very high fixed costs, and you had to call Paxos. That’s changed,” he stressed.

Carter believes that, eventually, all stablecoins in the market will become yield-bearing, and even giant incumbents like Tether, which have resisted this new trend, will have to yield to maintain their relevance.

The recent rise of Ethena’s USDe, a yield-bearing synthetic dollar, to the third place in the stablecoin podium seems to validate Carter’s insights about the future of the stablecoin industry and how it might evolve going forward.