Weekly Recap
January 13, 2024

Crypto Fundamentals #59

USDC Stablecoin Issuer Circle confidentially files for IPO

Jimmy Zheng
COO

This week, the Bitcoin ETF goes live, Jim Cramer calls “major top” in Bitcoin and Bitwise says its Bitcoin ETF drew the highest inflows on first trading day with $240mm of inflows.

🌞 USDC Stablecoin Issuer Circle confidentially files for IPO

💫 Investment Management Platforms Brevan Howard and Hamilton Lane plan to tokenize funds in partnership with Libre

The week saw price drops across the L1 ecosystem from alt L1s and layer 2s as average and median W/W prices declined by 2.0% and 3.0%, respectively, as the BTC ETF quickly turned into a “sell the news” event. However, ETH-related tokens including ETH and OP saw resilience vs. the broader ecosystem with low double-digit gains on the week. Alt L1s sold off across the board with SOL and FTM trading down high single digits (down ~9% WoW). The S&P 500 and Nasdaq Index grew on the back of REITs and tech (Meta floating within ~2% of its 52W High), increasing by 1.7% and 2.8% WoW, respectively, but were dragged down by airline stocks.

🌞 USDC Stablecoin Issuer Circle confidentially files for IPO

Circle Internet Financial, stated on Thursday that it had filed for a US initial public offering. The company was previously valued at $9bn in a 2022 deal to go public via a SPAC. The negotiations around the deal ended in December 2022 with Circle CEO Jeremy Allaire indicating that he still intended to take the company public.

USDC is the second largest stablecoin boasting a market cap of $27bn, while market leader USDT boasts a ~$101bn market cap

Today, USDC is the second largest stablecoin after USDT (Tether) and boasts a stablecoin market cap of ~$27bn, which is down from a peak of ~$56bn in mid 2022. The USD-equivalent tokens are backed by cash and cash equivalents including short-term treasury bonds. Interestingly, while USDC stablecoin volumes lag that of USDT, transfer volumes (i.e. value of tokens moved across accounts / applications on-chain) are comparable, with USDC seeing considerable growth in transfer volumes in the recent months of Dec 2023 and Jan 2024.

market share of USDT transfer volume (green) vs. USDC (blue)
Gross transfer volumes across stablecoins - USDT (green), USDC (blue)

How does Circle make money? Today, Circle generates the vast majority of its revenue through interest income from assets such as dollar deposits and short-term treasuries. A Bloomberg Article stated that Circle generated ~$779mm in revenue in 1H 2023, surpassing its FY 2022 of $772mm in just half a year. The performance of Circle’s business is highly dependent on the instruments that it invests its assets into, which has made it a beneficiary of rising interest rates. The company also noted that it generated $219mm in Adj. EBITDA in 1H 2023, which also outpaced its FY 2022 adj. EBITDA figure of $150mm. The company also stated it has built up over $1bn of cash on its balance sheet as of June 2023.

In the future, Jeremy has already indicated that he plans for Circle to expand beyond its core stablecoin business and has already launched a crypto wallet service after acquiring CYBAO in 2022. While Circle’s business model is in many ways still unproven, its move towards the public markets will continue to provide more transparency and disclosures around core products powering the crypto space, and we are excited to keep track of its progress.

💫 Investment Management Platforms Brevan Howard and Hamilton Lane plan to tokenize funds in partnership with Libre

Brevan Howard and Hamilton Lane, two major asset managers, have indicated plans to tokenize their investment funds. The effort will be conducted in collaboration with “Libre Capital” which aims to provide asset tokenization and collateralized lending features to institutional investors which will ultimately improve access to alternative investments. Libre is a joint venture between WebN, a Alan Howard backed startup and Nomura’s digital asset subsidiary Laser Digital. Libre’s CEO / Founder, Dr. Avtar Sehra, previously worked on securities tokenization and RWAs starting on Bitcoin in 2014 and then moving onto Ethereum.

Libre intends to go live with its core product offerings in Q1 2024, enabling asset tokenization through the Polygon Network and programmable features such as collateralized lending and automated rebalancing of separately managed accounts (SMAs). As part of the announcement, Victor Jung, head of digital assets at Hamilton Lane, stated that “we believe that tokenization has the potential to revolutionize the way investments are managed and traded.”

Brevan Howard also intends to utilize tokenization to enable further liquidity for their clients, with Natalie Smith, head of strategy and client partnerships at Brevan Howard, noting that “the tokenization of funds allows us to offer investors a new way to access our strategy…”

Interestingly, Sehra has expressed that he intends for Libre to aim for “full-on decentralization” and that he believes it is important for issuers and distributors tokens to interact completely on chain without the need of any other platform. Sehra believes that “this decentralized infrastructure needs to have compliance built into it… It’s not just about adding KYC and AML…” He also stated that “over time, our goal is to take operational costs down to near zero, from an average of around 100 basis points for an alternative asset… the aim is potentially to start making money on the protocol purely from value-add web services like collateralize lending and secondary transfers.”

While the venture is still in its early stages, the large scale partnerships that Libre has facilitated and its near-term product roadmap are cause for excitement and we look forward to seeing how these initiatives materialize during 2024.

Detailed dashboard for people who love more numbers in smaller font:

1/15/2024 EDIT: Artemis Comps Dashboard updated to reflect the latest set of developer data. Artemis made a backend change to our date syntax which was not reflected in the last version that was posted.

Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism (source: Token Terminal). Weekly commits and weekly dev activity as of 12/16/23.

The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.

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