Hey all! I’ve been OOO for the past week so its been a bit quiet, however I’m back now and going to be getting into the swing of things! This edition is going to be nice and juicy so let’s jump in.
The biggest piece of news that has been rattling my mind over the past few weeks has been the following:
When I first read up about this, I couldn’t fully believe it had happened. Lo and behold though, we’re here. First of all, gotta hand it to CZ for executing the move. Audacious af and makes complete business sense. However, what intrigued me more was the “why” around the decision.
You see, when you execute a move like this you can only really do it once. If you’re going to do it once, you want to do it at the absolute top (as perceived by you). So why do we think CZ thinks this is the “top” to execute such a move at? In my view, it comes down to the recent regulatory action but also a new hidden opportunity in the market that is now present and he recognises clearly. Let’s got another layer deeper here.
Last month (or whenever), when Circle complied with the US Treasury to enact sanctions on Tornado Cash they spooked a lot of the market with the fact USDC got frozen in a snap. Circle clearly communicated their intent to the market that they’re willing to bend the knee with close to zero resistance. Given USDC’s deep dependencies in the entire ecosystem this caused a lot of panic. I think the response was overblown. Based on conversations I’ve had with various insiders, it seems to me that the US Treasury didn’t realise they’d get this much backlash but also unaware o the ripple effects that they’ve created inside the 3 letter agency circles.
Given USDC marked themselves as a dangerous place to go to, that leaves people with 2 other real options — USDT and algo stables. USDT is shady but they openly said they’re not going to comply unless explicitly asked to — unlike USDC.
Algostables (DAI, FRAX, LUSD) are great but are a tiny portion of the market cap and don’t really serve the scale of liquidity the space needs (not to mention they also rely on centralised stables). Of course, while all of this was going on CZ put the facts together and managed to pull of a brilliant move:
People distrust USDC given how willing they are to comply with sanctions
The space is looking for a stablecoin that can handle scale and is not USDC or USDT
Binance has a stablecoin and holds tens of billions of other stablecoins
Given all these 3 factors put together he acted with tenacity and pulled this off.
Distribution is king and CZ has deeply internalised it.
The next step, BUSD is going to start marketing itself as the undercover stablecoin that won’t comply with sanctions. I mean Binance has built their entire corporate strategy to avoid regulation or skirt it by being location fluid. They’re also much more cleaner than USDT and have the trust of industry at scale so people will give them a shot.
I’d assume they’re going to make a much stronger push for getting BUSD on other chains and you’re going to see Binance push their reach further than they have in the past. CZ gets how the game goes given he’s a 3 cycle player.
The crypto game is incredibly fascinating if you know how to view the events happening in the right light.