circle’s recent initial public offering or IPO
was one for the history books shares debuted at $31 only to rocket over $30 in a day briefly
hitting above $100 a share and forcing multiple trading halts along the way now though investors
are left wondering if Circle’s sky-high valuation actually makes sense or if it’s just another
cryptoreated frenzy that’s sure to fizzle out well today we’re taking a closer look at Circle’s
fundamentals and future growth potential examining the biggest risks facing the company and looking
to answer the allimportant question is Circle stock actually worth it or should you steer clear
so I can stay clear my name is Guy and this is a video you don’t want to miss okay I’ll start by
saying that nothing in this video is financial advice it’s purely educational content intended
to inform you about Circle now before we can properly assess Circle’s astronomical valuation
we need to understand exactly how it got here so for those unfamiliar Circle Internet Financial
aka Circle was founded way back in 2013 by Jeremy and Sha Neville two seasoned entrepreneurs with a
track record of building successful tech companies initially Circle’s founders aimed to harness
Bitcoin to become the backbone of a new digital payment system albeit one that was centralized
rather than decentralized circle along with the likes of Coinbase and Digital Currency Group even
attempted to push major changes to Bitcoin’s code this was done through something known as the
New York agreement in 2017 which essentially aimed to increase Bitcoin’s block size when that
initiative failed Circle quickly pivoted towards Ethereum and this led to the creation of a new
stable coin USDcoin or USDC in 2018 now USDC was developed jointly with Coinbase through
the Center consortium an organization formed to set regulatory and operational standards for
stable coins and for years Coinbase and Circle shared both governance responsibilities and the
profits from USDC’s enormous reserve income but more on that later now Circle’s IPO ambitions
first surfaced in 2021 when it attempted to list via a special purpose acquisition
company or spa the timing seemed perfect coinbase had successfully listed that very
same year and crypto was enjoying a bull run however Circle Spack deal faced relentless delays
due to regulatory roadblocks from the then hostile SEC and eventually collapsed altogether following
the market chaos triggered by FTX’s downfall in late 2022 but that wasn’t the end of Circle’s IPO
journey after filing a confidential registration with the SEC in January 2024 Circle made headlines
again on the 1st of April 2025 when it formally announced plans to list its stock under the ticker
CRCL on the New York Stock Exchange this IPO drew massive attention from institutional heavyweights
such as BlackRock which aim to scoop up about 10% of the offering interestingly BlackRock also
manages Circle’s cash reserves h probably nothing and Kathy Woods Arc Invest was also planning to
invest $150 million into the company now initially Circle intended to offer 24 million shares
at a price between 24 and $26 each but due to overwhelming investor demand Circle bumped this up
significantly eventually selling 34 million shares at an elevated IPO price of $31 each raising an
impressive $1.1 billion the excitement reached its peak on the 5th of June 2025 CRCL’s stock
market debut investors watched in disbelief as shares surged over 300% hitting an intraday high
of over $100 in fact trading volatility became so extreme that trading of CRCL was repeatedly halted
throughout the day with it eventually closing at a still staggering $82 per share at the time of
shooting Circle stock sits comfortably above $150 per share giving the stable coin issuer a market
cap of over $36 billion and making it one of the largest crypto stocks out there now following
such an explosive IPO investors are naturally left scratching their heads does Circle really
deserve these astronomical valuations based on fundamentals or is it merely another crypto stock
caught up in a speculative mania well to answer this we need to take a closer look at Circle’s
financial fundamentals but before we do if you’re enjoying this video so far then be sure to smash
that like button to help give it a boost and if you haven’t already subscribe to the channel and
ping that notification bell so you won’t miss our next upload first up let’s talk about revenue
circle operates a float driven revenue model meaning nearly all its earnings around 98% to be
precise come directly from interest earned on the billions of dollars held as reserves backing its
USDC stablecoin mainly short-term US government bonds according to Circle’s recent IPO filings the
company generated approximately $1.68 billion in revenue for 2024 and notably that’s a solid 16%
increase from its 2023 revenue of 1.45 billion recent figures from early 2025 also suggest
Circle is on track for an annualized revenue run rate of roughly $2.3 billion this year in fact
Circle’s first quarter revenue this year grew an impressive 58% compared to the same period in
2024 placing it among the fastest growing fintech companies in existence but here’s the catch
impressive revenue growth doesn’t automatically translate into impressive profits digging deeper
Circle’s operating income the profit it earns from day-to-day operations after covering salaries
overheads and other expenses was just $167 million in 2024 that’s only about 10% of its total revenue
which is a pretty thin profitability margin to say the least and to make matters worse Circle’s
adjusted IBITa a measure of core profitability before things like taxes and accounting charges
stood at just $284 million for 2024 that might sound decent at first glance but it underscores
how much Circle’s margins are squeezed after operational costs and here’s where things get even
trickier you see after Coinbase exited from its joint venture with Circle the center consortium
in 2022 a new agreement between the two companies was struck under this new arrangement Coinbase
directly receives roughly 50% of the revenue generated from Circle Stable Coin reserves in 2024
alone Circle had to pay Coinbase a staggering $98 million more than half of Circle’s overall revenue
this arrangement poses a major problem for Circle even though its overall revenue grew significantly
these hefty payments to Coinbase actually caused Circle’s profits to shrink and speaking of which
Circle’s IPO filings revealed another serious red flag the company reported a substantial net
loss of $769 million during the 2022 bare market this suggests that Circle’s finances are extremely
sensitive to crypto market cycles and raises the likelihood it could again lose significant sums
if or rather when stable coin demand declines in the next bare market and Circle’s profits are
also highly sensitive to interest rates remember Circle earns interest on the enormous reserves
backing USDC analysts have estimated that for every quarter of a percent drop in interest rates
Circle’s annual IBITa could fall by roughly $100 million to offset this drop USDC adoption and
supply would have to grow by at least 10% which is a pretty tall order particularly if crypto
markets turn choppy again or if Circle encounters fierce competition from other stable coin issuers
but again more on that in a bit and finally let’s not forget about Circle’s sky-high valuation
the company’s IPO initially valued it at around $6.9 billion pricing shares at $31 each but
after soaring close to 500% Circle now commands a market cap of roughly $36 billion according
to some analysts that’s over 100 times earnings that means investors are paying over $100 for
every single dollar of profit that Circle actually earns a massive premium when you consider the
median fintech company trades closer to just 31 times earnings so clearly Circle’s valuation
is currently driven more by speculation than fundamentals and this raises an important question
what exactly are investors betting on here well it could have something to do with Circle’s
ambitious growth plans so let’s take a closer look at them before we do though if you’re thinking
of trading crypto to capitalize on all these market moves then you absolutely have to check
out the Coin Bureau deals page over there you’ll find signup bonuses of up to $100,000 trading
fee discounts as high as 50% and even deposit cashback offers of up to 75% at some of the best
crypto exchanges out there these offers won’t last forever so click the link in the description below
to take advantage of them ASAP thank me later okay when examining Circle’s growth plans let’s first
look at blockchain expansion circle USDC currently operates across 22 blockchains and counting most
recently USDC launched natively on the XRP ledger and Worldcoins World Chain now launching USDC on
XRP is quite significant when you consider that Ripple recently introduced its own stable coin
RLUSD presumably as a mechanism for borrowing against its vast XRP treasury without having to
sell its holdings but well that’s a rabbit hole for another time both these recent deployments
though are possible thanks to Circle’s Crosschain Transfer Protocol or CCTP for anyone unfamiliar
CCTP is essentially circles technology that allows USDC to be transferred instantly across
different blockchains making cross-chain transactions nearly frictionless with the upgraded
CCTP version 2 these transactions now settle even faster boosting USDC’s liquidity and ease of
use significantly both crucial for adoption meanwhile another major recent move is Circle’s
partnership with Brazilian fintech firm Matera enabling Brazilian banks to directly integrate
USDC into their banking and payment systems this effectively places within traditional financial
infrastructure in Brazil putting it in an ideal spot to capitalize on future growth in digital
payments and speaking of payments if you watched our recent video on PayFi you’ll know that
stable coins are perfectly positioned to revolutionize payment infrastructure once sector
specific regulations come into force given that Circle’s IPO filing revealed financial backing
and underwriting support from Wall Street giants like JP Morgan and City Bank Circle appears
wellprepared to leverage these connections to expand USDC’s use in the payment sector if stable
coin regulations are clarified soon as many expect this could significantly increase adoption and
institutional investment in the likes of USDC but Circle’s ambitions extend even further in
January 2025 Circle acquired Hashnote issuer of US Yieldcoin or USYC one of the largest
tokenized realorld asset funds on the market circle explicitly stated that the goal behind this
acquisition is positioning USYC as the preferred yieldbearing collateral across crypto exchanges
prime brokers and institutional custodians and Circle also recently introduced another lesserk
known but significant service Circle Mint this allows exchanges and institutional players
to mint large volumes of USDC without paying any transaction fees potentially making USDC
a convenient and cost-effective solution for institutions looking to move large amounts of US
dollars digitally meanwhile Circle is expanding its stable coin suite internationally launching
EURC a Eurobbacked stable coin compliant with Europe’s Micer regulations now although EURC
remains minuscule in volume when compared with USDC it’s one of the first regulated stable
coins in the Euro zone which actually poses some hidden risks but more on them later
and let’s not forget regulatory tailwinds both the US Senate and House are actively pushing
forward with stablecoin legislation the Genius Act and the Stable Act respectively which could soon
provide the regulatory clarity Circle needs to unlock even more institutional investment and
usage so taken together these factors indicate a promising path ahead for Circle on paper at
least however as you might expect significant challenges remain and Circle’s current market
position is anything but guaranteed so let’s take a look at these challenges that Circle
faces first there’s competition now so far Circle has held a strong position in the stable
coin space usdc is second only to Tether’s USDT in terms of market cap but traditional financial
institutions have been watching carefully from the sidelines and they’re gearing up to enter the
market as soon as regulations become clear giants like JP Morgan have already experimented with
private stable coins and other major institutions like Bank of America and Fidelity are actively
working on launching their own stable coins too and let’s not forget PayPal which aims to
onboard 20 million merchants to its PYUSD stable coin by year end these aren’t lightweight
competitors they’re financial titans with massive global trust established brand recognition
and virtually unlimited financial firepower circle also faces significant challenges
from Tether whose USDT remains dominant internationally boasting over $150 billion in
circulation compared to roughly $60 billion for USDC now while USDT is primarily used for leverage
trading and pulled against altcoins on centralized exchanges Circle’s USDC has traditionally been
used in DeFi making its growth heavily reliant on DeFi activity rebounding substantially even
more concerning though is Circle’s decision to comply with Europe’s Micer regulations something
its largest rival Tether deliberately avoided this compliance requires eurobacked stable
coins like Circle’s EURC to be primarily backed by European government debt unfortunately these
European bonds are significantly less liquid and stable than US treasuries which presents a major
risk imagine a scenario where inflation resurfaces in Europe forcing interest rates higher and bond
prices lower if Circle faces large redemptions of its EURC stable coin under these conditions it
might struggle to sell these EU bonds quickly without incurring heavy losses potentially causing
EURC to dep and then there’s Coinbase Circle’s longtime partner and original co-founder of USDC
through the Center Consortium as mentioned earlier following Coinbase’s exit from the consortium in
2022 Circle now shares roughly 50% of its stable coin reserve revenues with the exchange under
a new deal but recent moves suggest Coinbase might be considering a future without Circle with
the exchange recently investing in an independent Canadian stable coin issuer if Coinbase ultimately
launches its own stable coin Circle could lose a critical demand driver since USDC effectively
serves as Coinbase’s main exchange stable coin on the bright side however a Coinbase exit would free
Circle from the costly revenue sharing agreement significantly improving Circle’s profitability
but here’s the catch as mentioned earlier Circle actually lost a substantial amount of money
during the last crypto bare market as stable coin demand dropped sharply without Coinbase’s support
Circle could be financially exposed in a similar downturn and speaking of bare markets we need to
acknowledge the cyclical nature of crypto itself usdc’s primary use case remains speculation in
DeFi in bare markets stable coin demand naturally declines directly hurting Circle’s revenue if
traditional finance competitors strategically launch their stable coins precisely when crypto
activity is lowest then Circle could lose market share at the worst possible time and with these
stable coins being backed by mega banks they could effectively be seen as too big to fail something
Circle can’t claim even with Black Rockck’s backing so while Circle currently benefits from
being seen as the most regulated and perhaps most trusted stable coin issuer that narrative could
quickly unravel when traditional finance giants step in with their own stable coins all right so
after everything we’ve covered there’s really only one question left to answer is Circle stock
actually worth your hard-earned money well on the positive side Circle clearly has serious
momentum its recent revenue growth has been undeniably impressive and its position as one of
the most regulated stable coin issuers certainly gives it an advantage over many of its competitors
however this brings us to a critical question what exactly is Circle’s endgame well we think the
company’s ultimate goal could be to position USDC as a so-called synthetic CBDC or central
bank digital currency something Circle CEO Jeremy Aair has openly discussed as the name suggests
synthetic CBDC’s involve a partnership between a private company in this case Circle and a central
bank like for instance the Federal Reserve to issue what amounts to a de facto central bank
digital currency jeremy has said that USDC’s reserves could one day be held directly at the
Fed which would mean shifting reserves away from traditional US bonds towards direct central bank
liabilities or facilities like the Fed’s overnight reverse repo where yields can be earned without
price risk if this scenario plays out Circle would effectively be issuing a digital dollar
indistinguishable from an actual CBDC given that centralized stable coins already have built-in
programmability like the ability to freeze funds for instance this somewhat dystopian scenario
seems far more plausible than perhaps many realize now President Trump has explicitly rejected the
idea of a US CBDC however the same isn’t true for Europe and this might explain why Circle decided
to take on the risks associated with complying with Europe’s Micer regulations potentially
aiming to position EURC as a synthetic CBDC in the European Union now clearly this path would
stray very very far from crypto’s decentralized ethos but considering the intense competition that
Circle will soon face from financial giants like JP Morgan and PayPal well positioning itself as a
synthetic CBDC issuer might actually be its best or perhaps only way of surviving and maintaining
market share in the coming years but what does all of this mean for Circle’s stock well considering
that CRCL is already trading at over 100 times earnings it’s hard to deny that it’s significantly
overvalued at its current levels moreover as we’ve mentioned Circle historically suffered significant
losses during crypto bare markets due to falling stable coin demand this means Circle stock could
plummet along with the broader crypto market once speculative demand inevitably dries up making
it a particularly risky hold when the next bare market rolls around it almost seems though as
if Circle is strategically building itself a financial runway to weather the next bare market
now if you watched our recent video on the crypto IPO boom you’ll know that there’s a long queue of
crypto companies waiting to go public after Circle logic would suggest these companies believe the
current bull run still has plenty of gas left in the tank and they want to time their IPOs close
to the mania phase of this cycle so while circle CRCL stock could rise further from current levels
alongside the broader crypto market we wouldn’t expect the kind of crazy returns we’ve seen up to
now in fact you might even be better off waiting for some of those other upcoming crypto IPOs not
financial advice of course all that said though if Circle successfully survives the next bare
market and overcomes the challenges that we’ve discussed today then CRCL could actually become
a compelling stock to pick up during the next downturn but let’s just hope this crypto bull
run still has some way to go for the sake of our altcoin bags and our sanity and that’s all
for today’s video folks but if you want to see our top five stock picks for crypto exposure then
check out our dedicated video on them right over here thank you all so much for watching and I’ll
see you again very soon this is Guy signing off
Add A Comment