One month ago, the most discussed topic about stablecoin issuer Circle on social media was still the rumor of "selling $4 billion to Coinbase or XRP." After Circle released its prospectus in early April, the industry's doubts about its declining market share, low gross margin, and single profit channel were loud. Industry insiders widely believed that Circle's IPO plan, re-launched after many years, might have a hard time impressing the market.

However, the enthusiasm for the stablecoin concept among investors far exceeded the expectations of cryptocurrency practitioners: Circle debuted at $31 per share, with a valuation reaching $6.9 billion, an oversubscription ratio as high as 25 times; the stock opened at $69, immediately saw a violent surge, fell back from a high of $103.75 after two circuit breakers, and stabilized at $84.92, increasing its market value to $18.7 billion. What caused such a dramatic reversal in market sentiment? Has Circle's fundamentals truly improved, or is the market undergoing an "emotional reassessment" of the stablecoin narrative?

Two months, a massive market sentiment reversal

Around April this year, when stablecoin issuer Circle restarted its IPO plan, the market's attitude was generally cautious, if not bearish. Many analyses pointed out structural bottlenecks in Circle's business, such as excessive reliance on USDC reserve interest, low gross margin, and insufficient revenue growth momentum.

According to Circle's prospectus, its revenue for the fiscal year 2024 is about $1.67 billion, a year-on-year increase of 16%, but net profit plummeted from $267.6 million in 2023 to $155.7 million in 2024, a 41.8% decrease. On the one hand, interest income from USDC is a pro-cyclical dividend, and once the Fed enters a rate-cutting cycle, Circle's reserve income will systematically decline. On the other hand, Circle has incurred high costs in promoting USDC, especially paying a 50% distribution cost to Coinbase, leading to its extremely low gross margin. Statistics show that Circle's gross margin has rapidly dropped from 62.8% in 2022 to 39.7% in 2024.

Detailed description in Circle's prospectus of the revenue sharing terms with Coinbase

In short, many investors questioned: Circle's profit model is too single and fragile, lacking long-term prospects.

Meanwhile, rumors of Circle's sale have been circulating in the market. In May, a Cointelegraph report stated that crypto giants including Ripple and Coinbase had considered acquiring all of Circle at a valuation price of $40 to $50 billion, with the deal even coming close to fruition. Although Ripple's CEO later personally denied seeking to acquire Circle, and Circle itself emphasized that the "company is not for sale," the emergence of these rumors alone indicates a lack of industry confidence in Circle's prospects. When a company is rumored to be willing to sell itself at a price equivalent to or well below its previous SPAC valuation (which sought a $9 billion IPO in 2022), it inevitably raises questions about its ability to develop independently.

Additionally, the decline in USDC's market share is a fact. Since the Silicon Valley bank scandal in 2023, USDC circulation has plummeted from its peak, with its market share being squeezed by competitor USDT. These factors combined made Circle look unattractive just two months ago, with many viewpoints holding a reserved or even bearish stance on its IPO prospects, believing that fundraising might face a cold reception.

However, just two months later, market sentiment made a 180-degree turnaround. In early June, Circle officially launched its IPO pricing, and investor demand surged. Not only did the offering size increase from 24 million to over 34 million shares, but the offering price was also raised from the initially planned $24 per share to $27 per share, bringing its overall valuation back up to $6.2 billion. In the end, Circle completed the offering at $31 per share, receiving over 25 times oversubscription, raising approximately $1.1 billion.

The fervor of the subscription process completely dispelled the market's previous subdued expectations. More notably, this IPO attracted enthusiastic participation from top institutions: the underwriting lineup was led by Wall Street investment banks such as JPMorgan Chase, Citigroup, and Goldman Sachs, with BlackRock subscribing to about 10% of the shares and the Ark Investment Fund subscribing to $150 million. Driven by strong demand, there was a shift in Circle's original design of a high proportion of early shareholders cashing out: the initially planned secondary sale proportion of up to 60% (14.4 million shares sold by founders and VCs) as outlined in the prospectus was now reduced to 8 million shares, accounting for only 25%. This adjustment indicated that even Circle's internal shareholders chose to sell less and retain more, underscoring the high market enthusiasm.

Behind the Sentiment Reversal, Has the Fundamentals Changed?

Over the past two months, the stablecoin sector has successively received significant regulatory tailwinds, creating an excellent policy environment for the Circle IPO.

In late May, the U.S. House Financial Services Committee overwhelmingly passed the so-called "GENIUS Act," a stablecoin regulatory bill. The bill aims to establish a clear federal regulatory framework for U.S. dollar-backed stablecoins, signaling that stablecoin issuers may soon say goodbye to the gray area and enter a licensed compliant new phase.

For Circle, this is a significant policy boon—once the stablecoin's status gains legal recognition, the market will reassess the compliance and sustainability of its business model. Circle astutely chose this window to list preemptively, seen by the industry as a combined "regulatory arbitrage + market reassessment" bonus, meaning that they endorsed compliance just before the bill's formal implementation and gained investor and policymaker acceptance through a U.S. stock market listing.

In addition to the United States, Hong Kong also introduced a stablecoin regulatory framework during the same period. On May 30, the Hong Kong SAR Government published the "Stablecoin Ordinance" in the Gazette, marking the formal enactment of the ordinance. Previously, on May 21, the Hong Kong Legislative Council passed the ordinance bill in the third reading, establishing a licensing regime for stablecoin issuers pegged to fiat currency. This means that Hong Kong will be one of the few jurisdictions globally, apart from the United States and the European Union, with clear stablecoin regulatory regulations.

Table of Contents of the Hong Kong Stablecoin Ordinance Bill, passed in the third reading by the Hong Kong Legislative Council on May 21

This series of new changes in the global regulatory environment has significantly boosted market confidence in the prospects of compliant stablecoins, laying the groundwork for Circle's value reassessment.

The second key driver behind the shift in market sentiment comes from strong "buy orders" by heavyweight institutional investors. At the end of May, Ark Invest, led by Cathie Wood, expressed interest in purchasing up to $150 million in Circle's IPO shares. Additionally, global asset management giant BlackRock plans to subscribe to approximately 10% of the issued shares, with the two institutions collectively subscribing to about 30% of this funding round.

BlackRock's participation is particularly significant for Circle. On the one hand, BlackRock began deep cooperation with Circle as early as 2022, with Circle agreeing to have at least 90% of the USDC reserves managed by BlackRock. In exchange, BlackRock commits not to issue its stablecoin for four years. This agreement not only strengthens the security and liquidity management of the USDC reserves but also brings traditional financial heavyweight endorsement to Circle.

Behind the Wall Street "Great Buy-In" phenomenon is a bold bet on the compliance and stablecoin prospect, as well as a reevaluation of Circle's global expansion capabilities and USDC's dominant position in the ecosystem. Many Wall Street institutional investors have been cautious about pure crypto businesses in the past, but now they can indirectly invest in the crypto market expansion through Circle. The recognition of large institutions has also greatly influenced the market's attitude towards Circle.

However, regulatory legislation and institutional entry undoubtedly belong to the long-term logic: they have legitimized the stablecoin industry, opened up future growth space, and are not just a momentary hype. But in the short to medium term, the resurgence of USDC market cap and the frenzy of buy-ins may have some pro-cyclical emotional components. Since the second quarter of this year, with the sharp rise in Bitcoin prices and the overall warming of the crypto market, the stablecoin sector has taken advantage of the opportunity to constantly create "conceptual buzz," and the fervor of the Circle IPO subscription seems more like a short-term excess demand driven by investor FOMO.

Currently, the United States is still in a high-interest-rate environment, and Circle enjoys substantial interest income. Many institutions, including Circle itself, hope to take advantage of this performance bonus before the interest rate cut, which is to some extent a gamble on short-term performance. Once the Federal Reserve starts lowering interest rates, the market may reassess Circle's profitability. If Circle's fundamentals are proven wrong in the future (e.g., USDC growth falls short of expectations, gross margin fails to improve), the current optimism may also fade away.

In many traditional media comments, the triple attributes of stablecoins, which combine "policy endorsement, technological imagination, and industrial landing," align with the market's preference for themes that are "storytelling, implementation-driven, and policy-supported." However, for Circle, behind the thematic hype, its ability to deliver still needs time to be tested.

A $7 Billion Valuation, Too High or Too Low?

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

In 2008, Visa raised $17.9 billion in its IPO, surpassing AT&T's $10.6 billion to become the largest IPO in U.S. history at the time. Circle aims to "replace the Visa payment system." With a projected net profit of $156 million in 2024, calculated at a $7 billion valuation, the static P/E ratio is approximately 45 times. In comparison, Visa's net profit for the 2024 fiscal year is about $17 billion, with a market value close to $500 billion and a P/E ratio of around 30 times.

From a revenue model perspective, Visa relies mainly on card transaction fees, leveraging its market monopoly as a moat, leading to steady revenue growth and an extremely high profit margin (gross margin consistently above 70%). In contrast, Circle has faced growth challenges in recent years (with USDC market share consistently suppressed by USDT, unable to effectively surpass the 30% mark) and margin issues (maintaining around 30% in recent years), drawing constant scrutiny from the industry. In terms of profit quality, Visa's income sources are diverse and stable, while Circle's profits mainly come from reserve interest, making it susceptible to macro interest rate policies and crypto market cycles, resulting in higher volatility.

Stablecoin Market Share, Data Source: DeFiLlama

When it comes to replacing Visa, perhaps Tether and its USDT have a better chance. In 2024, Tether achieved a record-high profit of $14 billion with only 150 employees, creating an average value of up to $93 million per person, leaving Wall Street giants speechless. A simple estimation based on a traditional financial company's 15x P/E ratio puts Tether's valuation at around $200 billion.

Some competitors with publicly priced alternatives in the industry can also serve as a reference point. For example, the decentralized synthetic dollar protocol Ethena, with its stablecoin USDe issuance and business model different from Circle, is not backed by fiat reserves but rather a "synthetic dollar" hedged by asset positions such as crypto derivatives and collateral, aligning its revenue-generating ability directly with the investment enthusiasm in the cryptocurrency secondary market. Earlier this year, Ethena's governance token ENA briefly approached a market cap of $40 billion and has since stabilized at around $20 billion over the past few months.

The market's high valuation multiples for Circle mainly stem from growth expectations. While Visa, as a payment giant and matured company, experiences slower growth, the stablecoin sector where Circle operates is in its early stages of rapid development. Investors may believe that under the "regulatory moat," Circle's competition with Tether will introduce more variables, opening up more room for future profit growth.

On the other hand, whether Circle's valuation will inherit the volatility of the crypto market is another key focus for the market to observe and validate, as seen in the valuation fluctuations of the "first crypto stock," Coinbase.

When Coinbase went public in 2021, its market capitalization briefly surged to $86 billion. Subsequently, the crypto market gradually turned bearish, and Coinbase's stock price saw a significant pullback, at one point nearing the $10 billion mark. This volatility was once again highlighted in the first quarter of 2025, with Coinbase's stock price showing a high correlation with the cryptocurrency market, mainly driven by altcoin trading.

$COIN Price Trend, Coinbase's IPO is widely regarded as a significant marker of the 2021 crypto market's shift from bull to bear; Data Source: Trading View

By comparison, Circle's $7 billion valuation is just a fraction of Coinbase's. This reflects the differences in their business models and investor expectations: Coinbase, as an exchange, heavily relies on crypto trading volume for revenue, leading to performance volatility following market fluctuations; whereas Circle, as a stablecoin issuer, derives its revenue mainly from reserve interest and related service fees, with investors believing that its valuation is less influenced by the crypto market and more by the macro interest rate environment.

It is worth noting that Coinbase also receives substantial interest income through USDC reserve sharing (50%), a business area directly related to Circle. To some extent, Coinbase's valuation also includes a premium for its USDC business.

However, regardless, compared to Coinbase's initial PE ratio of 300x at the time of listing, Circle's current valuation multiple of around 45x seems much more moderate. The market seems to be valuing Circle more in line with the logic of a conventional financial services company rather than a tech unicorn. A perception of being "slightly conservative, leaving room for growth" has become a mainstream view on Circle's $7 billion valuation, and looking at its strong performance post-IPO, this perception appears to hold true.

Asia Region Paving the Way?

While Circle's IPO was garnering intense interest, the Asian capital markets were already witnessing a surge in the "stablecoin concept" trend. Stocks related to this concept in the Hong Kong and A-share markets recently experienced a frenzy, with multiple stocks hitting daily price limits or experiencing significant price surges, as if stablecoins had suddenly become the new focus of capital markets overnight.

The reason behind this is that it was the first time the stablecoin concept had emerged in Asian stock markets. While the stock market has seen speculation around concepts like "blockchain," "web3.0," "NFTs," and other crypto-related ideas, the stablecoin concept had never appeared before. In other words, for the majority of non-crypto enthusiasts, the stablecoin concept is entirely new.

In addition to favorable policies, after the news of the late May Hong Kong "Stablecoin Regulation" legislation, the Hong Kong stock market took the lead in speculating on the stablecoin concept. In early June, as Circle confirmed its listing date, the Hong Kong and A-share sectors experienced a coordinated outbreak. Within two days on June 2nd and 3rd, more than ten stablecoin-themed stocks in the Hong Kong and A-share markets collectively surged, showing astonishing gains. It is said that more than 20 brokerage firms issued over 30 stablecoin research reports overnight, keeping up with current events and explaining to everyone what this narrative is all about.

The most watched stablecoin-related concept stocks in the Hong Kong and A-share markets are mainly divided into two categories: direct participation and indirect benefit types.

The direct participation targets are mainly concentrated in the Hong Kong stock market. These companies have direct equity or business relationships with stablecoin projects, hence the benefit logic is clear. For example, China Everbright (00165.HK) made a strategic investment in Circle in 2016. The recent IPO will greatly increase Everbright's equity value, leading to a surge in the stock price by over 26% at one point. Another example is Zhongan Online (6060.HK), whose invested company is involved in stablecoin issuance, and its subsidiary bank provides stablecoin custody services, attracting hot money.

Indirect benefit targets are more common in the A-share market. While they do not have direct stablecoin business, their products/technologies can be applied to the stablecoin concept's related industry chain, with the logic being more of a "possibility." For example, GreenTree Group (603123) primarily engages in department store retail but has developed a scenario for digital RMB payment, being considered by the market as the "future pioneer of stablecoin offline applications," leading to consecutive daily limit up. YUYIN Group (002177) is an ATM and banking equipment manufacturer that has ventured into digital currency ATMs in recent years, resulting in a four-day streak of limit up stock prices. Companies like Sifang Innovative (300468) and Xiongdi Technology (300546) have also been hyped by speculators for their involvement in digital payments, electronic identity recognition, and other businesses.

Market analysis of stablecoin concept-related targets, image source from Tonghuashun

As the first stock of compliant stablecoin operations, the greater significance of its IPO lies in confidence transfer and trend confirmation—conveying confidence in the mainstream recognition of stablecoins and confirming the trend of stablecoin compliance and capitalization. In Hong Kong, the global attention brought by Circle's listing may indeed help the local stablecoin sector gain more endorsement and cooperation opportunities, attracting overseas funds into Hong Kong's digital financial field.

From widespread bearish sentiment just two months ago to a 25x oversubscription today, Circle has gone through a significant market reversal. As a stablecoin serving as a bridge between the traditional financial world and the crypto space, stablecoins are now receiving unprecedented attention and reassessment. Circle's story may just be the beginning. With the implementation of the U.S. GENIUS Act and the issuance of a stablecoin license in Hong Kong, we may see a more mature and rational stablecoin ecosystem. At that time, the market will speak through fundamentals to evaluate whether the initial logic shift truly holds water.

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