Micro2Macr0
Macro Economist
Circle does not look like a buy after its drop if a new rival stablecoin has broken its business model. Per @puckrin, Stripe, Coinbase, Visa, Mastercard, BlackRock and more than 140 others launched Open USD, which charges zero minting fees and hands reserve yield back to partners; that yield is Circle's business model, which @puckrin calls an existential threat. Circle stock fell 14% on the news. x.com x.comÂ
Circle's long-term multi-bagger thesis, that USDC becomes a key part of next-generation payment rails, no longer looks on track. In just the past few days, 140 entities, including many major names, partnered with OUSD, and Robinhood announced a 7% yield program via USDG. Circle can still be a successful business, and its fall to the targeted ~$64 entry level looks justified by fundamentals, so the 'Circle is poised to dominate' case is crumbling. x.comÂ
Circle's profits face growing pressure, and the market is starting to price that in. It earns most of its money from interest on USDC reserves, and Coinbase already takes about 50% of that revenue. USDC's $73 billion market cap trails Tether's $145 billion, and Open USD is adding pressure with zero minting fees and reserve income shared with over 140 partners. x.comÂ
Circle's USDC has a temporary EU go-to-market moat. The European Banking Authority gave USDC alone 'significant' stablecoin status among 45 e-money tokens under MiCA, adding a regulatory advantage to Circle's case as a sleeping giant. x.com x.comÂ
Circle faces pricing pressure because stablecoin infrastructure has low barriers to entry, which is why it stays an underweight with only small exposure. The risk showed when Circle fell 13% as Stripe, Coinbase and BlackRock backed a rival stablecoin, Open USD. x.com x.comÂ
Circle is unlikely to win corporate treasuries, because companies holding mostly T-bills gain nothing by handing those assets to Circle so it can collect their yield. That answers @drGhostinOO7, who argues corporate treasuries are waiting to be tokenized and Circle can take market share from SWIFT. x.comÂ
Circle makes money whenever interest rates stay elevated, because its $60B+ of USDC reserves earn Treasury yield. It takes no credit risk and runs no trading desk, which makes it the cleanest business model in crypto. x.comÂ
Circle's valuation is far too high to consider right now, given risks from crypto sentiment and margin pressure. That holds despite strong momentum: Q4 revenue rose 77% to $770M with a solid EPS beat, it has launched institutional payment platforms and expanded African partnerships, and potential US stablecoin legislation is a tailwind. x.comÂ
Bitcoin is a better buy than Circle, whose shares trade along with Bitcoin anyway. Circle also carries policy risk, which makes it a stock not worth backing. x.comÂ
Circle sits on the winning end of stablecoins crossing from crypto trading into global money movement, because it keeps the Treasury yield on USDC reserves while paying holders nothing. The stablecoin market grew over 50% in a year to above $310 billion, and USDC circulation rose 19% to $73.3 billion, yielding about $668 million a quarter of near-pure interest income. More adoption means a bigger balance sheet and higher interest profits, making Circle an interest-rate bet on digital cash. x.comÂ
Circle faces an existential threat because leaked CLARITY Act text would ban platforms from offering yield on stablecoins, directly or indirectly. Circle earns 96% of its revenue from interest on USDC reserves, and the bill also targets anything economically equivalent to interest, per @NeelMacro citing Eleanor Terrett. No yield on stablecoins means no demand for USDC, and Circle's revenue base evaporates. The stock fell 19% in a session, erasing $5.6B of market value. x.comÂ
