"The first stock of stablecoins"$Circle (CRCL.US)$Since its listing, it has surged over 247%, shocking observers in both the cryptocurrency and traditional financial sectors, with its stock price far exceeding three times its IPO issue price that was "oversubscribed by 25 times and increased."
As of this writing, Circle's pre-market has once again risen nearly 10% — is Circle's IPO an excellent opportunity to bet on the explosion of stablecoins or a high-flying stock that is perfectly priced yet overlooks potential risks? We will deeply analyze the investment opportunities of CRCL!
Overview of CRCL Investment Opportunities
After years of rumors and expectations, $USDCoin (USDC.CC)$ the stablecoin issuer Circle Internet Group officially submitted its listing application to the U.S. Securities and Exchange Commission (SEC) this spring. These documents provide investors with an in-depth look at the internal workings of the stablecoin industry.
Documents show that Circle is a "revenue engine" in a high-growth Industry - in 2024 alone, Circle earned over $1 billion in interest income from stablecoin reserves.
However, at the same time, the financial statements reveal that this Business is built on numerous trade-offs - after paying hefty partner fees, employee incentives, and heavy compliance expenses, Circle barely made a profit.
Circle currently supports its issued USDC stablecoin with over $60 billion in Cash / Money Market and US Treasury bonds. Although USDC is non-yielding, Circle still achieved a total revenue of $1.7 billion in 2024. However, the operating costs incurred to attract these reserve Assets are equally high.
In 2024, Circle paid $1 billion for "distribution and trading costs," becoming the largest expenditure item, primarily used to pay partners (especially Coinbase) for distributing rewards to USDC users. Additionally, Circle's wage expenses also reached $0.263 billion, and it spent $0.137 billion on "daily administrative costs" (including travel, office, insurance, legal, and tax services).
Nevertheless, Circle has achieved profitability for the second consecutive year (which is a significant accounting milestone and may be eligible for inclusion in the S&P 500 Index). However, its net income of $0.155 billion is trivial compared to major competitor Tether's reported $13 billion in 2024.
Catalysts driving the CRCL narrative.
Although Circle's current valuation of over $20 billion may seem slightly aggressive compared to initial expectations, it appears relatively conservative when compared to some native crypto projects, such as Ondo, which at the end of January 2025, received a similar $20 billion FDV with far less Assets under management than Circle.
Circle's profits will decline during turbulent times in the crypto market as funds leave the Industry. However, if USDC truly realizes applications in real-world payment scenarios, this risk will be significantly reduced. This is something that Coinbase (heavily reliant on trading volume), crypto ETFs (directly exposed to price fluctuations), or crypto treasury companies (highly sensitive to market volatility) cannot match.
For conservative or regulated financial institutional investors limited by traditional market channels, CRCL can serve as a practical blockchain "observational" investment symbol - providing a channel to access the crypto Industry while minimizing exposure to its highly speculative risks. The most notable growth factor for Circle is its partnership with BlackRock, the world's largest Asset Management company.
In March 2025, Circle signed a four-year memorandum of understanding (MOU) with BlackRock, increasing BlackRock's management share of Circle's reserves to 90%. The agreement clearly states that BlackRock must prioritize the use of Circle's stablecoin for all scenarios related to US dollar payments and is prohibited from launching competing stablecoin products.
Circle's IPO documents also disclose the fee arrangements with BlackRock, including "investment advisor fees" and "management fees," which provide BlackRock with direct economic incentives to promote USDC.
Signs that raise concerns.
Although many users in the crypto circle (especially on Crypto Twitter) criticize Circle's underwriters for setting the IPO issue price too low (only a third of its trading price after opening), objectively, achieving an initial issue price of $31 per share was considered a daunting task by many at that time.
Currently, Circle's Market Cap remains above $20 billion, implying that its PE has exceeded 130 times. This is an extremely high multiple that usually only occurs in stocks during market bubble periods. To rationalize this valuation, Circle must achieve substantial growth in Net income; otherwise, its stock price may likely decline in the future.
Although blockchain technology possesses high growth potential, once stablecoins become mainstream payment tools, regulation may open the door for traditional financial giants (such as Banks) to enter the stablecoin market. These mature Institutions may be able to respond to compliance pressures more efficiently than crypto-native companies like Circle and capture the market with their cost advantages.
One of Circle's main Business models is investing in short-term debt and continuously rolling over at market interest rates. This also means that a decline in interest rates poses the greatest profit risk for Circle. It is well known that the Federal Reserve has recently indicated that it may cut interest rates. If interest rates are lowered before USDC supply increases significantly, CRCL investors may face difficulties. Although lower interest rates will also reduce the "distribution fees" paid to partners, partially alleviating income shocks, according to Circle's own interest rate sensitivity forecast (assuming total USDC remains unchanged), every 1% decline in short-term interest rates will reduce Circle's profits by approximately $0.207 billion.
If the Federal Reserve lowers interest rates by 1% or more before real-world payment applications become widespread, Circle is likely to fall back into a state of loss, and its stock price is almost certain to be affected.
Summary
Few observers in the crypto industry or traditional financial professionals anticipated that the CRCL IPO would be so successful, far exceeding market expectations. While the market is never 'wrong', Circle has many tough battles ahead if it wants to maintain its $20 billion valuation.
Critics may point out that Circle has weaker profitability compared to Tether and allocates too much income to $Coinbase (COIN.US)$ . However, this is still the early stage of the stablecoin race, and from an equity investment perspective, CRCL is currently the only pure symbol that can be invested directly in the stablecoin sector.
The cooperation agreement between Circle and BlackRock requires the latter to prioritize the use of Circle's stablecoin in all dollar payment scenarios, providing a strong boost for the future integration of stablecoins into the mainstream financial system. However, the entry of traditional banks will also bring severe challenges.
These institutions are more composed in the face of more complex compliance requirements and have the ability to suppress the profit margins of crypto-native companies like Circle at a lower cost structure.
Additionally, Circle's profits are extremely dependent on the macroeconomic environment. If there is pressure from economic recession or further declines in interest rates, even if the supply of USDC remains unchanged (which is unlikely in a non-speculative market), Circle's profitability is likely to be affected.
CRCL is a stock that made a high-profile debut on the New York Stock Exchange, offering strong growth prospects and providing investors with a unique investment opportunity at the intersection of stablecoins and Institutions. However, before engaging in a "mindless rush," it is essential to carefully assess its core risks: interest rate fluctuations, entry of competitors, rising compliance costs, and uncertainty regarding profitability.
Editor/joryn
