ARK Invest issued a prediction on the newly launched Open USD (OUSD) stablecoin on July 8, with director of digital assets Lorenzo Valente dismissing the notion that OUSD threatens the dominance of Circle's USDC and Tether's USDT. Valente wrote a post on X stating the industry is vastly overestimating the new product. The prediction addresses market excitement around OUSD, which is backed by BlackRock, Visa, Mastercard, Coinbase, Aptos Labs, Solana, and Ripple, and highlights the embedded network effects and liquidity barriers that protect incumbent stablecoins in the digital dollar market.
ARK Invest Dismisses OUSD Threat to USDC and USDT
Lorenzo Valente wrote a long post on X on July 8 in which he dismissed any notion that OUSD threatens USDC and USDT. Valente said the industry is vastly overestimating the new product. Open Standard's OUSD is backed by BlackRock, Visa, Mastercard, Coinbase, Aptos Labs, Solana, and Ripple.
A stablecoin is a type of cryptocurrency designed to maintain a steady price by getting pegged to a stable asset. Circle Internet Group's USDC and Tether's USDT are pegged 1:1 to the U.S. dollar, which is why such stablecoins are called digital dollars.
Valente Highlights Network Effects and Liquidity Barriers
In his note, Valente talked at length about the network effects of stablecoins. Such effects are not created by logos but by liquidity, habit, collateral acceptance, integrations, brand recognition, market depth, settlement flows, and the fear of breaking what already works, he highlighted.
As OUSD will be a GENIUS Act-compliant stablecoin, it will not be able to share yield directly with users. In contrast, USDC offers a significant yield to holders, he underscored. Though OUSD will share the reserve economics with the platforms and businesses that distribute and use the stablecoin, these consortium companies accrue value in other ways, and in many cases their core businesses depend on the existing liquidity and network effects of USDT, USDC, and other stablecoins, Valente highlighted.
Binance, the world's largest crypto exchange, once had its own branded stablecoin, BUSD, but it had to shut down the project after regulatory pressure. Binance currently holds $45 billion worth of USDT which is the most liquid counterpair on the crypto exchange, Valente underlined. In fact, Binance's trading business is cemented by USDT liquidity, which it would not want to disrupt, he added.
Valente said he does not consider OUSD to be irrelevant but considered the market excitement around it exaggerated. The market is overestimating that a newly launched stablecoin can overcome embedded liquidity, he added.
Cathie Wood Confirms ARK's Position
In response, Cathie Wood said that the network effects of USDT and USDC have been powerful and underlined that the firm considers that OUSD is unlikely to displace them.
As reported earlier, ARK Invest, along with SoftBank Group, was in talks to invest in Tether, but there is no further update on the deal. As far as Circle is concerned, ARK regularly trades the publicly listed stablecoin company's shares.
FAQ
What did ARK Invest say about Open USD on July 8?
ARK Invest's director of digital assets Lorenzo Valente wrote a post on X on July 8 dismissing the notion that Open USD threatens the dominance of USDC and USDT. Valente stated the industry is vastly overestimating the new product.
Why does ARK Invest believe OUSD will not displace USDC and USDT?
Valente highlighted that stablecoin network effects are created by liquidity, habit, collateral acceptance, integrations, brand recognition, market depth, settlement flows, and the fear of breaking what already works. He noted that OUSD cannot share yield directly with users due to GENIUS Act compliance, while USDC offers significant yield to holders. Additionally, Binance holds $45 billion worth of USDT, which is the most liquid counterpair on the exchange, and its trading business is cemented by USDT liquidity.
What is Cathie Wood's position on OUSD?
Cathie Wood responded to Valente's post by stating that the network effects of USDT and USDC have been powerful and that ARK considers OUSD unlikely to displace them.
