A month ago, the most talked about stablecoin issuer Circle on social media was the rumor of a $4 billion sale to Coinbase or XRP. 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. Insiders generally believe that Circle's IPO plan to restart after many years may not be able to impress the market.

However, the enthusiasm for the stablecoin concept 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, making it the most watched IPO in the crypto industry in recent years. What caused such a sharp reversal in market attitudes? Are Circle's fundamentals really improving, or is the market experiencing an "emotional revaluation" of the stablecoin narrative?

Two months, the market expectation reversed

April this year, when stablecoin issuer Circle restarted its IPO plan, the market was generally cautious and even bearish. Many analysts have pointed out that there are structural bottlenecks in Circle's business, such as excessive dependence on USDC reserve interest for revenue, low gross profit margin, and insufficient revenue growth potential.

According to Circle's prospectus, its revenue for fiscal year 2024 was about $1.67 billion, up 16% year-over-year, but net profit plummeted to $155.7 million from $267.6 million in 2023, a decrease of 41.8%. On the one hand, the interest income brought by USDC is a pro-cyclical dividend, and once the Fed enters the interest rate cut cycle, the Circle reserve income will decline systematically. On the other hand, Circle has paid high costs to promote USDC, especially the 50% distribution cost paid to Coinbase, resulting in an extremely low gross profit margin. According to statistics, Circle's gross profit margin has dropped rapidly from 62.8% in 2022 to 39.7% in 2024.

Circle's detailed description

short, many investors questioned that Circle's profit model was too one-dimensional and fragile, and lacked long-term perspective.

At the same time, rumors of the sale of Circle are circulating in the market. In May, Cointelegraph reported that crypto giants, including Ripple and Coinbase, had considered buying the overall Circle at a valuation of $4 billion to $5 billion, and even came close to a deal at one point. Although the Ripple CEO later debunked the rumors that "it never sought to acquire Circle", and Circle also emphasized that "the company is not for sale", the rumors themselves show that the industry has little confidence in Circle's prospects - when a company is rumored to be willing to sell at the same market price and much lower than the previous SPAC valuation (which sought a $9 billion IPO in 2022), it will inevitably raise questions about its ability to grow independently.

In addition, it is also true that USDC's market share has declined. Since the Silicon Valley Bank turmoil in 2023, USDC circulation has shrunk sharply from its highs, and its market share has been squeezed by competitor USDT. The combination of these factors makes Circle two months ago look unattractive, with many views holding back or even bearish on its IPO prospects, believing that fundraising could be cold.

However, just two months later, the market sentiment took a 180-degree turn. Circle officially launched its IPO pricing in early June, and investors were enthusiastic about subscribing, not only increasing the size of the offering from 24 million shares to more than 34 million shares, but also raising the offering price from the original $24 to $27 per share, bringing its overall valuation back to $6.2 billion. In the end, Circle completed the offering at $31 per share, which was more than 25 times oversubscribed and raised approximately $1.1 billion.

Such a hot subscription situation has swept away the market's previous sluggish expectations. More strikingly, the IPO attracted a strong participation from top institutions: the underwriting lineup was led by Wall Street investment banks such as JPMorgan Chase, Citigroup, Goldman Sachs, BlackRock subscribed for about 10% of the shares, and Ark Investment planned to subscribe for $150 million. Driven by strong demand, Circle's original plan to cash out a large proportion of early shareholders has also changed: the secondary sale of 14.4 million shares, sold by founders and VCs, which was originally arranged in the prospectus, has now been reduced to 8 million shares, accounting for only 25%, which means that even Circle's internal shareholders have chosen to sell less and keep more, which shows the high market heat.

Behind the reversal of emotions, have the fundamentals changed?

In the past two months, the stablecoin space has ushered in a series of heavyweight regulatory tailwinds, creating an excellent policy environment for the Circle IPO.

LATE MAY, THE U.S. House of Representatives Financial Services Committee voted overwhelmingly to pass a stablecoin regulation bill known as the GENIUS Act. The bill proposes to establish a clear federal regulatory framework for US dollar stablecoins, which means that stablecoin issuers are expected to bid farewell to the gray area and enter a new phase of licensed compliance.

This is a huge policy boon for Circle – once the stablecoin identity is legally recognized, the market will reassess the compliance and sustainability of its business model. Circle's clever choice of this window period for a preemptive listing is regarded by the industry as a superimposed dividend of "regulatory arbitrage + market revaluation", that is, it is the first to complete the compliance endorsement on the eve of the official implementation of the bill, and win the recognition of investors and policymakers through the listing of the US stock market.

In addition to the United States, Hong Kong, China also introduced a regulatory framework for stablecoins during the same period. On May 30, the Hong Kong SAR government gazetted the Stablecoin Ordinance, marking the official enactment of the ordinance into law. Previously, on May 21, the Hong Kong Legislative Council passed the third reading of the bill, establishing a licensing regime for issuers of fiat currency-pegged stablecoins. This means that Hong Kong will become one of the few jurisdictions in the world outside of the United States and the European Union that have clear regulations on stablecoins.

Catalogue of Hong Kong's Stablecoin Bill, which passed

series of new changes to the global regulatory environment has greatly boosted the market's confidence in the outlook for compliant stablecoins and set the tone for Circle's revaluation.

The second key driver of the shift in market sentiment came from the strong "shouting" of heavyweight institutional investors. At the end of May, Cathie Wood's Ark Investments said it was interested in buying up to $150 million in shares in the Circle IPO, while global asset management giant BlackRock plans to subscribe for about 10% of the outstanding shares, with the two institutions collectively subscribing for about 30% of the fundraising.

Among them, the addition of BlackRock is of great significance to Circle. On the one hand, BlackRock began to work deeply with Circle back in 2022, and Circle agreed to hand over at least 90% of its USDC reserves to BlackRock in exchange for a promise not to issue its own stablecoin for four years. This protocol not only strengthens the security and liquidity management of USDC reserves, but also brings the credit endorsement of traditional financial giants to Circle.

Behind Wall Street's "big takeover" subscription phenomenon is a big gamble on the prospects of compliant stablecoins, as well as a reassessment of Circle's global expansion ability and dominance in the USDC ecosystem. Many Wall Street institutional investors used to shy away from crypto-only businesses, but can now indirectly invest in the crypto market's expansion expectations through Circle. And the recognition of large institutions has also greatly influenced the market's attitude towards Circle.

However, regulatory legislation and institutional entry are undoubtedly long-term logic: they justify the stablecoin industry and open up room for future growth, not speculation on a whim. However, in the short to medium term, the recovery in USDC's market capitalization and subscription boom have a somewhat pro-cyclical sentiment component. Since the second quarter of this year, the price of Bitcoin has risen sharply, the entire crypto market has recovered, and the stablecoin field has taken the opportunity to continue to do "concept building", and the popularity of Circle IPO subscription is more like a short-term excess demand driven by investors' FOMO psychology.

At present, the United States is still in a high interest rate environment, Circle enjoys considerable interest income, and many institutions and even Circle itself hope to enjoy this wave of performance dividends before the arrival of interest rate cuts, which is to some extent a game of short-term performance. Once the Fed enters the rate cut channel, the market may revisit Circle's profitability. The current optimism may also fade if future Circle fundamentals falsify (e.g., USDC growth is not as expected and gross margins are delayed).

In the comments of many traditional media, stablecoins "have the triple attributes of policy endorsement, technological imagination and industrial landing", which is in line with the market's preference for themes that "can tell stories, can land, and are encouraged by policies". But for Circle, behind the hype, its ability to deliver still needs to be tested by time.

$7 billion valuation, high or low?

Circle's IPO pricing corresponds to a valuation of about $6.9 billion, and as the "first stablecoin stock", the market does not seem to have established a consensus valuation model for it. So is Circle's valuation level of nearly $7 billion justified?

In 2008, Visa raised $17.9 billion in a public offering, surpassing AT&T's $10.6 billion to become the largest IPO in U.S. history at the time. Circle's ambition to "replace Visa's payment system" is a net profit of $156 million in 2024, with a static price-to-earnings ratio of about 45 times based on a $7 billion valuation. In comparison, Visa has a net profit of about $17 billion in fiscal 2024, a market capitalization of nearly $500 billion, and a price-to-earnings ratio of around 30x.

From the perspective of profit model, Visa mainly focuses on card transaction fees, uses its market monopoly position as a moat, and has a steady growth in revenue and extremely high profit margins (gross profit margin of more than 70% all year round). In contrast, Circle's growth woes in recent years (USDC's market share has been suppressed by USDT for many years and has failed to effectively break through the 30% mark) and gross profit (which has only remained around 30% in recent years) have been questioned by the industry. From the perspective of profit quality, Visa's profit sources are diversified and stable, while Circle's profit mainly comes from reserve interest, which is susceptible to 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 are more promising. In 2024, Tether will make $14 billion in profits with 150 employees, creating an average value of $93 million per person, leaving Wall Street giants awkrising. Based on a simple 15x price-to-earnings ratio of traditional financial companies, Tether is valued at around $200 billion.

Some competitors in addition to the industry with open pricing can also be a reference dimension. For example, Ethena, a decentralized synthetic dollar protocol, has a completely different stablecoin USDe issuance and business model from Circle, and the underlying layer does not rely on fiat currency reserves, but is backed by asset positions such as crypto derivatives and collateral hedging the "synthetic dollar", so its revenue capacity is also directly linked to the investment enthusiasm of the cryptocurrency secondary market. At the beginning of this year, the market cap of Ethena's governance token, ENA, was approaching $4 billion at one point and has stabilized at around $2 billion in the past few months.

market's high valuation multiple for Circle is mainly due to growth expectations. Visa, as a payment giant and mature enterprise, is growing slowly, and Circle's stablecoin space is in the early stage of rapid development, investors may think that under the "regulatory moat", the battle between Circle and Tether will usher in more variables, opening up more imagination space for future profit improvement.

On the other hand, whether Circle's valuation will inherit the volatility of the crypto market is also a major point that needs to be paid attention to and verified by the market, as is the fluctuation of the valuation of Coinbase, the "first cryptocurrency stock".

When Coinbase went public in 2021, its market capitalization soared to $86 billion, and then the crypto market gradually turned bearish, and Coinbase's stock price corrected sharply, once close to falling below the $10 billion mark. This volatility was highlighted again in the first quarter of 2025, with the Coinbase share price showing a high correlation with the cryptocurrency market, which is dominated by altcoin trading.

$COIN price action, Coinbase's listing is widely seen as an important sign of a bullish turn in the crypto market in 2021; Source: Trading View

Circle's $7 billion valuation is a fraction of Coinbase's. This reflects the difference between the two business models and investor expectations: Coinbase, as an exchange, is highly dependent on crypto trading volume for its revenue, and its performance fluctuates wildly with the market; As a stablecoin issuer, Circle's income mainly comes 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's worth noting that Coinbase is also currently earning a lot of interest income through USDC reserve profit sharing (50%), which is directly related to Circle. To some extent, Coinbase's valuation also includes a premium to the USDC business.

Regardless, Circle's current valuation multiple of around 45x is much more modest than Coinbase's initial price-to-earnings (P/E) of 300x. The market is valuing Circle more according to the logic of a conventional financial services company than a tech unicorn, and "slightly conservative and leeway" is currently a mainstream view of the $7 billion valuation.

Asian handicap warms up first?

At the same time as the Circle IPO was hot, the Asian capital market took the lead in setting off a "stablecoin concept" craze. The related concept stocks of Hong Kong stocks and A-shares have skyrocketed recently, and many stocks have continued to rise or rise sharply, as if stable coins have become a new outlet in the capital market overnight.

The reason for this is that this is the first time that the concept of stablecoins has appeared in Asian stock markets. The stock market has hyped up the concepts of "blockchain", "web3.0", "NFT" and other currency circles, but the concept of stablecoins has never appeared. In other words, the concept of stablecoins is a new concept for most people in the non-cryptocurrency circle.

Coupled with the favorable policies, after the news of the legislation of Hong Kong's "Stablecoin Ordinance" came out in late May, Hong Kong stocks took the lead in launching the hype of the concept of stablecoins. At the beginning of June, as Circle confirmed the listing time, the Hong Kong stock and A-share sectors were linked to the outbreak, and in two days from June 2 to 3, more than a dozen stablecoin-themed stocks in Hong Kong stocks 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 kind of narrative this is.

At present, the most popular stablecoin-related concept stocks in Hong Kong stocks 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 a direct equity or business relationship with the stablecoin project, so the logic of the benefits is clear. For example, China Everbright Limited (00165.HK) made a strategic investment in Circle in 2016, and its recent IPO will greatly increase the value of Everbright's stake, so the stock price moved in response, rising more than 26% in a day. There is also ZhongAn Online (6060.HK), whose shareholding company is involved in stablecoin issuance, and its banks provide stablecoin custody services, which are also sought after by hot money.

The indirect beneficiary target is mostly in the A-share market, and there is no direct stablecoin business, but its products/technologies can be applied to the relevant industrial chain of the stablecoin concept, and the logic is more of a "possibility". For example, Cuiwei Co., Ltd. (603123), the company's main department store retail, but has developed a digital yuan payment scenario, which is associated with the market as a "future stable coin offline application pioneer", and the stock price continues to rise; Royal Silver Co., Ltd. (002177) is an ATM and banking equipment manufacturer, due to the layout of digital currency ATMs in recent years, the stock price is 4 days and 4 boards; There are also Sifang Jingchuang (300468) and Xiongdi Technology (300546) because they have participated in digital payment, electronic identification and other businesses, and have been excavated and hyped by the capital.

The market's combing of the subject matter related to the concept of stablecoin, the source of the picture comes from the straight

As the first stock of stablecoins operating in compliance, the greater significance of its IPO lies in the transmission of confidence and trend confirmation - it conveys the confidence that the stablecoin is recognized by the mainstream, and confirms the trend of stablecoin compliance and capitalization. In Hong Kong, the global attention brought by Circle's listing may indeed help the development of the local stablecoin field gain more endorsement and cooperation opportunities, and attract overseas capital to invest in Hong Kong's digital finance sector.

From the general bearish two months ago to the 25x overoffering today, Circle has experienced a major reversal in market expectations. Stablecoins, as a bridge between traditional finance and the crypto world, are gaining unprecedented attention and revaluation. The story of Circle may be just the beginning, with the implementation of the GENIUS Act in the United States and the issuance of stablecoin licenses in Hong Kong, we may see a more mature and rational stablecoin ecosystem. At that time, the market will use fundamentals to test whether this logical shift is really tenable.