Bankless: Why is Circle's IPO exceptionally popular?

Author: Jack Inabinet Source: Bankless Translation: Shan Ouba, Golden Finance

On June 5, 2025, Circle went public on the New York Stock Exchange, shocking observers in both the cryptocurrency and traditional financial sectors. Its stock price soared to a high of $103 within 15 minutes of the IPO, which is three times its initial public offering price that was "oversubscribed 25 times and increased."

So, is Circle's IPO a great opportunity to bet on the explosion of stablecoins, or is it a high-flying stock that is perfectly priced but ignores potential risks? We will delve into the investment opportunities of CRCL!

CRCL Investment Opportunity Overview

After years of rumors and anticipation, USDC 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" located in a high-growth industry — in 2024 alone, Circle earned over $1 billion in interest income from stablecoin reserves.

But 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 costs, Circle barely achieves profitability.

Circle currently supports its issued USDC stablecoin with over 60 billion dollars in cash and U.S. Treasury securities. Although USDC itself yields no interest, Circle still achieved 1.7 billion dollars in total revenue in 2024. However, the operational costs incurred to attract these reserve assets are also quite high.

In 2024, Circle paid 1 billion dollars for "distribution and transaction costs," becoming the largest expense item, primarily used to pay partners (especially Coinbase) for distributing rewards to USDC users. Additionally, Circle's payroll expenses reached 263 million dollars, and it spent 137 million dollars on "daily administrative costs" (including travel, office, insurance, legal, and tax services).

Nevertheless, Circle has achieved profitability for the second consecutive year (which is an important indicator in accounting and may be expected to be included in the S&P 500 index). However, its $155 million net profit is insignificant compared to the $13 billion reported by its main competitor Tether for 2024.

Catalyst for 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. By the end of January 2025, Ondo achieved a similar $20 billion FDV with a significantly lower asset management scale than Circle.

The profits of Circle will decline during turbulent times in the cryptocurrency market as funds withdraw from the industry. However, if USDC truly realizes its application in real-world payment scenarios, this risk will be greatly reduced. This point is unparalleled by Coinbase (which is heavily reliant on trading volume), cryptocurrency ETFs (which are directly exposed to price fluctuations), or cryptocurrency vault companies (which are highly sensitive to market volatility).

For conservative or regulated financial institutional investors limited by traditional market channels, CRCL can serve as a practical "observational" investment target for blockchain - providing a channel to access the crypto industry while exposing them to relatively less of its highly speculative risks. The most noteworthy growth factor for Circle is its partnership with the world's largest asset management company, BlackRock.

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 USD payments, and must not launch competing stablecoin products.

Circle's IPO documents also disclosed the fee arrangements with BlackRock, including "investment advisory fees" and "management fees", which provide BlackRock with direct economic incentives in promoting USDC.

Signals Causing Concern

Despite many users in the crypto community (especially on Crypto Twitter) criticizing Circle's underwriters for setting the IPO issue price too low (only one-third of its trading price after opening), objectively speaking, achieving the initial issue price of $31 per share was considered a daunting task by many at that time.

Currently, Circle's market capitalization is still above $20 billion, which means that its stock has a price-to-earnings (P/E) ratio of more than 130x. This is an extremely high multiplier that is usually only seen in stocks during market bubble periods. To rationalize this valuation, Circle must achieve significant earnings growth, or its share price is likely to decline in the future.

Although blockchain technology has 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 established institutions may be able to respond to compliance pressures more efficiently than crypto-native companies like Circle, and with their cost advantages, they could dominate the market.

One of Circle's key business models is investing in short-term debt and constantly renewing it at market rates. This also means that falling interest rates are Circle's biggest profit risk. As we all know, the Federal Reserve has recently signaled a rate cut. If interest rates had been lowered before USDC supply grew significantly, CRCL investors could be in for a hard time. While lower interest rates will also result in a reduction in "distribution fees" paid to partners, partially mitigating the revenue shock, Circle's profit will be reduced by approximately $207 million for every 1% decrease in short-term interest rates, based on Circle's own rate-sensitive projections (assuming the total amount of USDC remains constant).

If the Federal Reserve lowers interest rates by 1% or more before the widespread adoption of real-world payment applications, Circle is likely to fall back into a loss state, and its stock price is almost certain to be impacted.

Summary

Few observers in the cryptocurrency industry or traditional finance professionals anticipated that the CRCL IPO would be so hot, far exceeding market expectations. Although 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 revenue to Coinbase. However, this is still the early stage of the stablecoin race, and from the perspective of equity investment, CRCL is currently the only pure target that can directly invest in the stablecoin sector.

Circle's partnership agreement with BlackRock calls for the latter** to prioritize the use of Circle stablecoins in all USD payment scenarios**, which provides a strong support for the integration of stablecoins into the mainstream financial system in the future. However, the entry of traditional banks will also pose serious challenges.

These institutions are more composed in the face of increasingly complex compliance requirements, and have the ability to suppress the profit margins of crypto-native companies like Circle at a lower cost structure.

In addition, Circle's profits are extremely dependent on the macroeconomic environment. In the event of recessionary pressures and further declines in interest rates, Circle's profitability is likely to be affected even if the USDC supply remains unchanged (which is less realistic in a non-speculative market).

CRCL is a high-profile NYSE stock with strong growth prospects, offering investors a unique investment opportunity at the intersection of stablecoins and institutional partnerships. But before it can be "brainless", its core risks must also be carefully assessed: changes in interest rates, competitor entry, rising compliance costs, and uncertainty about profitability.