A month ago, the most discussed topic on social media about stablecoin issuer Circle was the rumor of selling to Coinbase or XRP for $4 billion. After Circle released its prospectus in early April, the industry has been questioning its declining market share, low gross profit margin, and single profit channel. Investors in the industry generally believe that Circles IPO plan, which has been restarted after many years, may not impress the market.
However, the enthusiasm of funds for the concept of stablecoins has completely exceeded the expectations of crypto practitioners: Circle completed its IPO at $31 per share, with a valuation of $6.9 billion and an oversubscription multiple of 25 times; the stock opened at $69, and then immediately rose violently, falling from a high of $103.75 after causing two circuit breakers and stabilizing at $84.92, increasing its market value to $18.7 billion. What caused such a drastic reversal of market attitude? Has Circles fundamentals really improved, or is the market experiencing a reevaluation of sentiment about the stablecoin narrative?
Two months later, market expectations have reversed
Around April this year, when stablecoin issuer Circle restarted its IPO plan, the market was generally cautious or even bearish. Many analysts pointed out that Circles business has structural bottlenecks, such as excessive reliance on USDC reserve interest, low gross profit margin, and insufficient revenue growth momentum.
According to Circles prospectus, its revenue for fiscal year 2024 is about 1.67 billion U.S. dollars, a year-on-year increase of 16%, but its net profit will drop sharply from 267.6 million U.S. dollars in 2023 to 155.7 million U.S. dollars, a decrease of 41.8%. On the one hand, the interest income brought by USDC is a pro-cyclical dividend. Once the Federal Reserve enters a rate cut cycle, Circles reserve income will systematically decline. On the other hand, Circle has paid a high cost to promote USDC, especially the 50% distribution cost paid to Coinbase, resulting in its extremely low gross profit margin. According to statistics, Circles gross profit margin has dropped rapidly from 62.8% in 2022 to 39.7% in 2024.
Detailed description of Coinbase profit sharing terms in Circle’s prospectus
In short, many investors questioned that Circles profit model was too single and fragile, and lacked long-term prospects.
At the same time, there are rumors about the sale of Circle in the market. In May, Cointelegraph reported that crypto giants including Ripple and Coinbase had considered acquiring the entire Circle at a valuation of $4 billion to $5 billion, and were even close to a deal. Although Ripples CEO later personally refuted the rumor, saying that it has never sought to acquire Circle, and Circle also emphasized that the company is not for sale, the emergence of the rumor itself shows that the industry lacks confidence in Circles prospects - when a company is rumored to be willing to sell itself at a price equivalent to the market price and far lower than the previous SPAC valuation (which sought to go public at $9 billion in 2022), it is inevitable that people will question its ability to develop independently.
In addition, it is also true that USDCs market share has declined. Since the Silicon Valley Bank incident in 2023, USDC circulation has shrunk significantly from its high point, and its market share has been squeezed by its competitor USDT. These factors combined made Circle look unattractive two months ago, and many people were reserved or even bearish about its IPO prospects, believing that fundraising might be cold.
However, just two months later, market sentiment took a 180-degree turn. Circle officially launched IPO pricing in early June, and investors subscribed enthusiastically. Not only did it increase the size of the offering from 24 million shares to more than 34 million shares, it also raised the offering price from the original $24 per share to $27, bringing its overall valuation back to $6.2 billion. In the end, Circle completed the offering at $31 per share, which was oversubscribed by more than 25 times, raising about $1.1 billion.
Such a hot subscription situation has swept away the markets previous sluggish expectations. What is more striking is that this IPO has attracted the enthusiastic participation of top institutions: the underwriting lineup is led by Wall Street investment banks such as JPMorgan Chase, Citigroup, and Goldman Sachs, BlackRock subscribed to about 10% of the shares, and Ark Investments plans to subscribe to $150 million. Driven by strong demand, Circles original plan for a large-scale cash-out exit by early shareholders has also changed: the initial prospectus arranged for secondary sales to account for as much as 60% (14.4 million shares, sold by founders and VCs) but has now been cut to 8 million shares, accounting for only 25%. This adjustment means that even Circles internal shareholders choose to sell less and keep more, which shows how hot the market is.
Behind the reversal of sentiment, have the fundamentals changed?
In the past two months, the stablecoin field has ushered in a series of heavyweight regulatory benefits, creating an excellent policy environment for Circles IPO.
In late May, the U.S. House of Representatives Financial Services Committee voted overwhelmingly to pass the stablecoin regulatory bill known as the GENIUS Act. The bill intends to establish a clear federal regulatory framework for U.S. dollar stablecoins, which means that stablecoin issuers are expected to bid farewell to the gray area and enter a new stage of licensed compliance.
For Circle, this is a great policy benefit - once the stablecoin status is legally recognized, the market will re-evaluate the compliance and sustainability of its business model. Circle cleverly chose this window period to go public first, which is regarded by the industry as a superimposed bonus of regulatory arbitrage + market revaluation, that is, it was the first to complete the compliance endorsement before the bill was officially implemented, and won the recognition of investors and policymakers by listing on the US stock market.
In addition to the United States, Hong Kong, China, also launched a stablecoin regulatory framework during the same period. On May 30, the Hong Kong Special Administrative Region Government published the Stablecoin Ordinance in the Gazette, marking that the ordinance officially became law. Previously, on May 21, the Hong Kong Legislative Council passed the draft bill in the third reading, establishing a licensing system for issuers of stablecoins pegged to legal currencies. This means that Hong Kong will become one of the few jurisdictions in the world with clear stablecoin regulatory regulations besides the United States and the European Union.
Table of contents of the Hong Kong Stablecoin Bill, which was passed by the Hong Kong Legislative Council on May 21
This series of new changes in the global regulatory environment has greatly boosted market confidence in the prospects of compliant stablecoins and set the tone for Circles revaluation.
The second key driver of the change in market sentiment came from the strong calls from heavyweight institutional investors. At the end of May, Cathie Woods Ark Investments expressed its intention to purchase up to $150 million in Circles IPO shares. In addition, global asset management giant BlackRock plans to subscribe to about 10% of the issued shares. The total subscription amount of the two institutions accounts for about 30% of the financing amount.
Among them, BlackRocks joining is of extraordinary significance to Circle. On the one hand, BlackRock began to cooperate deeply with Circle as early as 2022. Circle agreed to hand over at least 90% of its USDC reserves to BlackRock for management. In exchange, BlackRock promised not to issue its own stablecoin within four years. This agreement not only strengthens the security and liquidity management of USDC reserves, but also brings credit endorsement from traditional financial giants to Circle.
Behind the phenomenon of Wall Streets big takeover subscription is a gamble on the prospects of compliant stablecoins, as well as a reassessment of Circles global expansion capabilities and USDCs ecological dominance. Many Wall Street institutional investors used to stay away from pure crypto businesses, but now they can indirectly invest in the expansion expectations of the cryptocurrency market through Circle. The recognition of large institutions has also greatly affected the markets attitude towards Circle.
However, regulatory legislation and institutional entry are undoubtedly long-term logic: they justify the stablecoin industry and open up future growth space, and are not a temporary hype. But in the medium and short term, the rebound in USDC market value and the subscription boom have some pro-cyclical sentiment. Since the second quarter of this year, the price of Bitcoin has soared and the entire crypto market has rebounded. The stablecoin field has taken the opportunity to continuously create momentum for the concept, and the hot subscription of Circle IPO is more like short-term excess demand driven by investors FOMO psychology.
At present, the United States is still in a high-interest environment, and Circle enjoys considerable interest income. Many institutions and even Circle itself hope to enjoy this wave of performance dividends before the interest rate cut comes. This is a game of short-term performance to some extent. Once the Federal Reserve enters the interest rate cut channel, the market may re-examine Circles profitability. If Circles fundamentals are falsified in the future (for example, USDC growth does not meet expectations and gross profit margins have not been improved), the current optimism may also fade.
In many traditional media comments, stablecoins have the triple attributes of policy endorsement, technological imagination and industrial implementation, which meets the markets preference for themes that can tell a story, can be implemented, and are encouraged by policies. But for Circle, behind the hype of the theme, its ability to cash out still needs time to be tested.
A valuation of $7 billion, is it high or low?
Circles IPO pricing corresponds to a valuation of approximately $6.9 billion. As the first stablecoin stock, the market does not seem to have established a consensus valuation model for it. So is Circles valuation of nearly $7 billion reasonable?
In 2008, Visa completed its public offering with a financing amount of US$17.9 billion, surpassing ATTs US$10.6 billion to become the largest IPO in US history at that time. Circle aims to replace the Visa payment system. The companys net profit in 2024 is US$156 million. Based on a valuation of US$7 billion, the static price-to-earnings ratio is about 45 times. In comparison, Visas net profit in fiscal year 2024 is about US$17 billion, with a market value of nearly US$500 billion and a price-to-earnings ratio of about 30 times.
From the perspective of profit model, Visa mainly relies on card swipe fees, and uses its market monopoly as a moat, with steady revenue growth and extremely high profit margins (gross profit margin is over 70% all year round). In contrast, Circles growth difficulties in recent years (USDCs market share has been suppressed by USDT all year round and has failed to effectively break through the 30% mark) and gross profit issues (only maintained at around 30% in recent years) have been questioned by the industry. From the perspective of profit quality, Visas profit sources are diverse and stable, while Circles profits mainly come from reserve interest, which is easily affected by macro interest rate policies and crypto market cycles and is more volatile.
Stablecoin market share, data source: DeFiLlama
In terms of replacing Visa, perhaps Tether and its USDT have more hope. In 2024, Tether achieved a super high profit of $14 billion with 150 employees, and each person created an average value of up to $93 million, which shocked Wall Street giants. Simply estimating at a 15 times price-to-earnings ratio of traditional financial companies, Tethers valuation is about $200 billion.
Some competitors that have public pricing outside the industry can also serve as a reference dimension. For example, the decentralized synthetic dollar protocol Ethena, whose stablecoin USDe issuance and business model are completely different from Circle, does not rely on fiat currency reserves, but is backed by asset positions such as crypto derivatives and collateral. Therefore, its revenue capacity is also directly linked to the investment enthusiasm of the secondary market of cryptocurrencies. At the beginning of this year, the market value of Ethenas governance token ENA was close to US$4 billion, and has stabilized at around US$2 billion in the past few months.
The high valuation multiples given to Circle by the market mainly come from growth expectations. Visa, as a payment giant and mature enterprise, has slow growth, while the stablecoin field in which Circle is located is in the early stage of rapid development. Investors may believe that under the regulatory moat, the competition between Circle and Tether will usher in more variables, opening up more room for imagination for future profit growth.
On the other hand, whether Circle’s valuation will inherit the volatility of the crypto market is also a major focus that requires market attention and verification. The valuation fluctuations of Coinbase, the “first cryptocurrency stock,” are a good example.
When Coinbase went public in 2021, its market value once surged to $86 billion. Then the crypto market gradually turned bearish, and Coinbases stock price fell sharply, once close to falling below the $10 billion mark. This volatility was highlighted again in the first quarter of 2025, and Coinbases stock price was highly correlated with the cryptocurrency market, which is mainly based on altcoin transactions.
$COIN price trend, Coinbase listing is generally regarded as an important sign of the crypto market turning from bull to bear in 2021; Data source: Trading View
In comparison, Circle’s $7 billion valuation is only a fraction of Coinbase’s. This reflects the differences in their business models and investor expectations: Coinbase, as an exchange, relies heavily on crypto trading volume for revenue, and its performance fluctuates dramatically with the market; while Circle, as a stablecoin issuer, mainly generates revenue from reserve interest and related service fees, and investors believe that its valuation is less affected by the crypto market than by the macro interest rate environment.
It is worth noting that Coinbase currently also obtains considerable interest income through USDC reserve sharing (50%), which is directly related to Circle. To some extent, Coinbases valuation also includes a premium for the USDC business.
But in any case, compared with Coinbases 300 times P/E ratio at the beginning of its listing, Circles current valuation of about 45 times seems much more moderate. The market is more like valuing Circle according to the logic of a regular financial services company rather than a technology unicorn. Slightly conservative, leaving room has become a major mainstream view of the $7 billion valuation, and judging from its hot performance after the opening, it is indeed the case.
Has the Asian session warmed up?
While Circles IPO was hot, the Asian capital market took the lead in setting off a wave of stablecoin concept. Hong Kong stocks and A-shares related concept stocks have seen a surge in recent times, with many stocks hitting the daily limit or rising sharply, as if stablecoins have become a new trend in the capital market overnight.
The reason is that this is the first time that the concept of stablecoins has appeared in the Asian stock market. The stock market has hyped up concepts in the cryptocurrency circle such as blockchain, web3.0, and NFT, but the concept of stablecoins has never appeared. In other words, the concept of stablecoins is a brand new concept for most people who are not in the cryptocurrency circle.
Coupled with favorable policies, after the news of the legislation of the Hong Kong Stablecoin Ordinance came out in late May, Hong Kong stocks took the lead in launching speculation on the concept of stablecoins. In early June, as Circle determined the listing time, the Hong Kong and A-share sectors broke out in tandem. From June 2 to 3, more than a dozen stablecoin-themed stocks in Hong Kong and A-shares collectively soared, with an astonishing rise. It is said that more than 20 brokerages issued more than 30 stablecoin research reports overnight, keeping up with current events and telling everyone what this narrative is.
Currently, the most popular stablecoin-related concept stocks in Hong Kong and A shares are mainly divided into two categories: direct participation and indirect benefit.
Direct participation targets are mainly concentrated in the Hong Kong stock market. Such companies have direct equity or business relationships with stablecoin projects, so the logic of benefiting is clear. For example, China Everbright Holdings (00165.HK) made a strategic investment in Circle in 2016. The recent IPO will greatly increase the value of Everbrights equity, so the stock price moved accordingly, rising by more than 26% during the day. There is also ZhongAn Online (6060.HK), whose holding company is involved in the issuance of stablecoins, and its bank provides stablecoin custody services, which is also sought after by hot money.
Indirect beneficiary targets are mostly in the A-share market. They do not have direct stablecoin business, but their products/technologies can be applied to the relevant industrial chain of the stablecoin concept. The logic is more of a possibility. For example, Cuiwei Shares (603123) is mainly engaged in department store retail, but has developed digital RMB payment scenarios. It is associated with the market as the future pioneer of offline stablecoin applications, and its stock price has been rising continuously; Yuyin Shares (002177) is an ATM and bank equipment manufacturer. Due to the layout of digital currency ATMs in recent years, its stock price has been rising for 4 days; and Sifang Jingchuang (300468) and Xiongdi Technology (300546) have been dug out by hot money for speculation because they have participated in digital payment, electronic identity recognition and other businesses.
The markets review of stablecoin-related targets, source: Tonghuashun
As the first stablecoin stock that operates in compliance, its IPO is more significant in terms of confidence transmission and trend confirmation - it conveys confidence that stablecoins are recognized by the mainstream and confirms the trend of stablecoin compliance and capitalization. In Hong Kong, the global attention brought by Circles listing may indeed help the development of the local stablecoin field to gain more endorsements and cooperation opportunities, and attract overseas funds to invest in Hong Kongs digital financial field.
From the general bearish outlook two months ago to the current 25 times oversubscription, Circle has experienced a major reversal of market expectations. As a bridge between traditional finance and the crypto world, stablecoins are gaining unprecedented attention and revaluation. The story of Circle may just be the beginning. With the implementation of the US GENIUS Act and the issuance of Hong Kong stablecoin licenses, we may see a more mature and rational stablecoin ecosystem. By then, the market will use fundamentals to test whether this logical shift is truly tenable.
