Foreword

Over the past four months, cryptocurrency has penetrated traditional banking and stock markets at an unprecedented rate, profoundly impacting the existing financial system. This rapid transformation has not only generated substantial profits for the industry but also brought higher investment risks and regulatory challenges. Faced with a rapidly changing situation, we have analyzed recent key developments, summarized four major trends driving the market boom, and explored potential future directions: Where are stablecoins headed? Will stock markets further embrace crypto assets? How will trading platforms evolve? Can the current prosperity last?

Notably, the public support for cryptocurrency from former U.S. President Trump became a significant turning point. His policy direction shifted regulatory attitudes from opposition to cooperation and facilitated the enactment of the first U.S. cryptocurrency legislation, triggering an explosion of new products and trading strategies, and causing ripple effects across stock markets, the banking industry, and fintech.

1. Stablecoin Legislation: From the Fringes to the Mainstream
   In July of this year, Trump signed a dedicated stablecoin bill, bringing these blockchain-based crypto assets pegged 1:1 to the U.S. dollar under a legal framework. Due to their price stability, stablecoins have become a "cash-like" instrument in the cryptocurrency market, widely used for cross-border payments, collateral liquidation, and other scenarios.

The new regulations not only grant stablecoins legal status but have also attracted attention from traditional banks and fintech companies. They seek to leverage stablecoins to improve transfer efficiency and reduce costs. In emerging markets, people are even using dollar-backed stablecoins to hedge against inflation and receive overseas remittances. However, the expansion of stablecoins could divert bank deposits, weaken lending capacity, and simultaneously increase reliance on government bonds.

Next, the details of regulation will become the focus of contention among various parties. The debate centers on whether stablecoins can pay interest to holders—banks fear deposit outflows, while crypto firms emphasize the need for competitiveness. Furthermore, the upcoming review of the Clarity Act may further influence the regulatory path for stablecoins.

2. The Stablecoin Market: From a Duopoly to a Fiercely Competitive Landscape
   Previously, the stablecoin market was dominated by Tether (USDT) and Circle (USDC), with a total market size exceeding $245 billion. Now, numerous banks, fintech companies, and even payment giants like Stripe are entering the fray, launching their own stablecoins or related infrastructure. For example, JPMorgan Chase has introduced a "deposit token," and BNY Mellon provides asset custody services.

Increased competition also brings concerns. The emerging exchange Hyperliquid even initiated a user vote to choose an issuer, sparking industry worries about profit margins being squeezed. More alarmingly, if a major stablecoin were to fail, it could trigger a chain reaction of sell-offs, affecting the treasury bond market and even the broader economy.

In the future, established players like Tether will need to maintain their edge through compliance and innovation. Regulatory rules and cooperation models will determine whether the industry moves towards a high-profit monopoly or a low-margin red ocean.

3. Crypto Company Listings: From the Fringes to the Darling of Capital
   As the regulatory environment warms, crypto companies like Circle, Figure, and Gemini have launched IPOs, with their stock prices soaring on the first day. Circle's stock price surged 358% above its issue price, demonstrating market enthusiasm. However, these companies are highly dependent on trading volume, and their volatility indirectly transmits risk to the stock market.

It is noteworthy that the FTX bankruptcy seems to have been forgotten by the market, as capital once again flows into crypto assets. Next, institutions like Kraken and Grayscale plan to go public, while the industry's longer-term goal is to promote stock tokenization—using blockchain tokens to represent equity in companies like Tesla and Nvidia, attracting global user participation.

4. The Convergence of Stocks and Crypto: Blurring the Lines of Speculation
   The most striking trend is the merging of meme stocks and cryptocurrency. Listed companies like MicroStrategy have purchased large amounts of Bitcoin, making themselves "crypto proxies" within the stock market. Subsequently, over a hundred companies announced plans to raise more than $137 billion to allocate to crypto assets.

However, the high risks of this strategy have already surfaced: the average return for related stocks is -2.9%, with an average first-day drop of 20.6%. Currently, the market capitalization of some companies far exceeds the value of their crypto assets, relying on market sentiment to support their financing capabilities. If the bubble bursts, the financing chain could break, exacerbating the risk of a price reversal. In response, Nasdaq has strengthened scrutiny, requiring some issuers to obtain shareholder approval.

Conclusion

Cryptocurrency is reconstructing the financial ecosystem with unprecedented depth and breadth. The four trends of legislation, competition, capitalization, and asset convergence will collectively determine its future trajectory. Whether facing opportunities or risks, market participants must remain clear-headed amidst the fervor and find anchors amidst the transformation.