The End of the Beginning, What Happens Next, and a Tether Case Study
The End of the Beginning, What Happens Next, and a Tether Case Study
We spent the early part of last week in New York and were fortunate to hear from several CEOs of leading Digital Finance, Blockchain, AI, and New Energy companies at the biannual Cantor Fitzgerald technology conference. We also spoke with members of Cantor's leadership team who, as you may recall, agreed to hold Tether's treasury years ago, and invested heavily into the company at what now appears to be a very attractive valuation.
It made us pause and reflect.
We have told you before that we are only at the end of the beginning of these disruptive technologies, however, sometimes it is hard to see just how much more is yet to come.
As investors, that's our job.
We should invest our capital not just at the beginning of an innovative transformation cycle but heavy up when the innovation's inflection point is reached, fundamental growth rates are accelerating, and value is rapidly growing and being captured by the disruptive category leaders.
In this week's newsletter, we:
Synthesize what we learned during the first phase of the new Digital Finance paradigm
Outline what we think will happen next.
Discuss a case study: Tether, the global category leader in the digitalization of money
Let's get started.
WHAT WE LEARNED DURING THE FIRST PHASE OF THE NEW DIGITAL FINANCE PARADIGM
We have learned so much over the last 15 to 20 years as we moved beyond the digitalization of communications and content to include the digitalization of commerce too. Here are the highlights regarding the digitalization of value including monies, commodities, and other assets:
New Approach to Trust. 17 years ago, an anonymous figure called Satoshi Nakamoto, taught us how to manage trust in a digital world and how to move value natively over the Internet. His, her, or their innovation was Bitcoin, a peer-to-peer cash, but more fundamentally, it was the underlying invention of Blockchain (a new trust system designed to enable the Internet for value transfer) and the innovation of tokenization on Blockchain rails, that have proved to be transformative.
Smart Contracts and Transactions. Eleven years ago, Vitalik Buterin showed how to extend this new paradigm of trust to every transaction, and indeed interaction, between parties through smart contracts. The protocol he launched to enable these smart contracts to be written and used for every worldwide transaction is called Ethereum, and it was designed at the outset to be leveraged by other software developers in their work.
Application to Traditional Finance. About the same time, JP Theriot and his team at Uphold, launched a first tokenized dollar called UPUSD. Shortly afterward, Brock Pierce, Reeve Collins, and Craig Sellars launched Realcoin (now called Tether). These first stablecoins demonstrated that traditional finance could benefit from the new innovations of digitalized trust, tokenization, and smart contracts. They also rapidly found that hundreds of millions of people around the world want traditional forms of value, like US dollars, to move across the Internet nearly instantly and at virtually no cost, bypassing the friction and insecurity of the current payments and banking system.
Launch of new Digital Venues. For users to transact value in Bitcoin, Stablecoins, or other crypto tokens, we needed new digital venues. Looking back today, these were born as much superior ways to provide financial services. Venues with names like Coinbase, Kraken, OKex, Robinhood, Uphold, and others first grew modestly, and then explosively, surpassing almost every other TradeFi player in terms of users.
Importance of Digital Natives. We also learned that digital natives, who now represent the majority of the world's people, expect natively digital solutions for all their needs, and that paper — and people — intensive solutions are now doomed. We also saw that digital natives can swing elections, and that politicians must be careful about prioritizing their incumbent paymasters over the next generation.
Launch of Peer to Peer Infrastructure (DeFi). In addition to centralized financial digitalization approaches, the last ten years have also taught us that peer to peer infrastructure can eliminate the need for intermediaries altogether. DeFi demonstrated it could work at scale and showed us how the fat protocol thesis and value can flow. DeFi has been a toy ecosystem but now the real businesses are scaling fast.
If You Can't Beat Them, Join Them. The last decade has also played out in an entirely predictable way:
Incumbents initially laughed, claiming they didn't need to improve because their products and services worked fine, despite the poor consumer benefit they delivered.
Then they started to try and block and stifle the innovations - both to give themselves more time, and in the hope that unlike King Canute, they could stop the tide of innovation from rising around them.
Finally, they — and every pro-innovation, progressive national jurisdiction, now led by the United States — determined they would embrace digital finance.
The End of the Beginning. Now in 2026 we are at the end of the beginning. Growth rates are accelerating, category leaders are emerging at scale, and new disruptive companies are capturing enormous value while incumbents, unwilling to innovate to deliver more consumer benefit, are losing it.
If we are at the end of the beginning, then what happens next?
WHAT WE THINK WILL HAPPEN NEXT
The billion dollar question.
If an investor could see the future with certainty, then of course, the payoff would be infinite. We don't set the bar quite that high. But as long term investors, we attempt to describe inevitable futures and the powerful tailwinds that will blow us towards them.
Here are some thoughts on what happens next:
We will start using digital finance in our everyday activities and transactions.
It happens first where TradFi is most broken. Where money is untrustworthy, devalues, hyperinflates, or gets expropriated routinely, and where developed world solutions are hard to access or simply unavailable.
It also starts first with money because we transact money all the time. The transaction values may be small, but the user base is vast, and the transaction volumes are huge.
Once natively digital transactions can be completed cheaply, quickly, and easily for monetary purposes, the tide of innovation will—and already has—begin to erode commodities and other asset classes.
Since this is part of a digitalization process that is at least 50 years old, we should expect software development to accelerate and disruption curves to steepen. Software developers build upon others' work all the time.
Additionally, intelligence itself—the most scarce of worldly goods — will be digitized. Our world will be interwoven with human and digital intelligences, and the speed and breadth of change will be breathtaking.
As with all paradigm shifts, it takes a while for the new paradigm to displace the old, but once the logjam breaks, the old paradigm gets abandoned quickly.
The big winners are the emerging category leaders who, born into the new paradigm of digital finance, are unencumbered by the need to upgrade legacy infrastructure. They can not only deliver existing products and services better using their new paradigm but also imagine entirely new ones.
Conversely the biggest losers are the incumbents. Their cultures, organizations and people have succeeded in the old paradigm, but rarely move easily to the new one. It takes some time to appreciate that their discounted cash flows, and terminal values not only need revision but, in some cases, will be set to zero.
Smart investors can begin to see more clearly, but most investors don't act. The value accrues to disruptive companies and their backers, but those are the few.
If you read the last ten years of our newsletters and books, you would find much more on this thesis. It has happened many times before, and we don't see why it will not happen many times in the future.
Finance is just one more area of human activity being digitized.
CASE STUDY: TETHER, THE GLOBAL CATEGORY LEADER IN THE DIGITALIZATION OF MONEY
To clearly show what we mean by a category leader and how value can accrue to them as they scale in the next phase, consider Tether. As Amazon is to electronic commerce and Google is to search, we believe Tether is to digital money.
A brief synthesis of our view follows:
Tether is a stablecoin issuer enabling global digital dollar payments, transfers, and savings—spanning FX, deposits, and hundreds of millions of peer-to-peer users:
Of companies striving to capture $7.5Tn daily in FX turnover and $70Tn in consumer deposits, Tether has ~60% share of a market that is <1% penetrated, with forecasts suggesting 6x-10x increase by 2030 (Citi GPS).
Blockchain technology is faster, cheaper, and universally accessible.
Stablecoins are digital dollars issued on Blockchain networks that enable faster, cheaper, and globally accessible payments.
The stablecoin market will scale rapidly.
Deposits: ~$300Bn today expected to grow to $2Tn - $4Tn by 2030.
Stablecoins could support $100Tn–$200Tn in annual transaction volume by 2030, assuming 50x transaction velocity and a $1.9Tn–$4Tn market size.
The GENIUS Act (2025) established US regulation for stablecoins, legitimizing the asset class and catalyzing institutional adoption.
Dozens of new entrants have announced plans to issue stablecoins but have neither expertise nor infrastructure.
The first and largest “category champion” for stablecoin growth is Tether:
~60% competitive share: Tether is the undisputed leader with est. 400M+ users, ~$187Bn in circulation, and ~$13Tn in annual transaction volume.
As the overall stablecoin market expands 6–13x by 2030, Tether’s dominant share positions it as the primary beneficiary of industry growth.
A powerful defensive moat — network effects, liquidity depth, exchange integrations, and regulatory positioning — protects against competitors.
Value is growing rapidly:
The press, including the Financial Times, has been discussing a potential new priced round at around a $500Bn post money valuation.
At $500Bn, the implied P/E is ~39x '26E and ~32x '27E — below Circle (~50x ‘27E) and a modest premium to Visa/Mastercard (~23x ‘27E). A payment-rail-plus multiple for a business growing meaningfully faster.
Growth not priced in: Base NI grows from $12.8Bn ('26E) to $30.3Bn ('30E) at ~24% CAGR with 96%+ margins. The entry price pays for current earnings; it does not account for the projected 2–3x growth in float and income.
Other Tether adjacent growth initiatives do not currently appear to be priced in:
AI and high performance computing
Real-world asset tokenization and trade finance
Bitcoin mining, energy, and infrastructure
P2P communications and decentralized infrastructure
If the market were to re-rate Tether from its current ~32x ’27E toward the 40–80x range estimated for category leaders, the implied valuation would increase materially.
That is what happens when a category leader in a sector of global digital transformation pulls ahead of its competition.
PAST IS PROLOGUE - AGAIN
We have seen it before: most of the alpha in the public markets over the last twenty years has been driven by this phenomena. We think we are about to see it again in multiple areas of innovation, including in Digital Finance and AI, both of which are our areas of focus.
Do not hesitate to reach out to us if you want to discuss our perspectives, including our thoughts on stablecoins, by contacting our team at IR@fifthera.com.
We look forward to talking to you about our investment strategies and activities.
The Fifth Era Partner Team
About Fifth Era
We are entering a period of unprecedented innovation we call the Fifth Era, and every industry and business will be dramatically impacted. We focus on investing into these new innovations. Fifth Era specializes in investment strategies which construct portfolios of hard-to-access funds and direct investments through our investment strategies - AI Access and Blockchain Coinvestors. Fifth Era's investment strategies are now in their 12th year and to date we have invested in a combined portfolio of 1,500+ companies and projects including 80+ unicorns. In the US we are a SEC registered investment advisor, in the UK a FCA appointed representative and our funds are registered in Switzerland. Visit us at www.FifthEra.com to learn more.
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