Circle Internet Group: A Long-Term Owner's Perspective

Fact: What it charges for. The most important way it earns money today is still not an explicit software subscription fee but the yield on reserve assets. Beyond that, Circle has other revenue, including subscriptions and services, transaction revenue, management fees related to USYC and the like, and some blockchain-infrastructure fees, but these remain small in size for now. In 2025 other revenue was only $110 million, less than 4% of total revenue; in 2024 it was only $15.17 million, less than 1%. This means that buying CRCL today is still essentially buying: USDC circulation × short-term interest rates × the share Circle keeps.

Inference: Whether revenue is recurring, stable, and predictable. The "recurring" nature of this business is stronger than that of a typical crypto-trading-themed stock, because as long as USDC continues to exist and reserves stay invested, interest income will keep being generated; but its "predictability" is weaker than that of a typical software company, because the driver is not contractual ARR but the stablecoin float and short-term interest rates. The company itself explicitly acknowledges in its annual report that changes in interest rates directly affect reserve income, while USDC circulation is influenced by end-user behavior, market structure, and platform policies, making it hard to forecast precisely. My judgment: this is "recurring revenue," but not "high-certainty recurring revenue."

Fact: Cost structure. Circle's costs fall mainly into three layers. The first is distribution and transaction costs, meaning the incentives and revenue shares paid to ecosystem distribution partners such as Coinbase and Binance; the second is compensation, legal and compliance, R&D, IT, and marketing expenses; the third is the non-cash expense of stock-based compensation. In 2025 the company's distribution and transaction costs were $1.664 billion and compensation expenses were $845 million, of which the cash flow statement disclosed stock-based compensation of $566 million. This structure shows that Circle is not an issuer that effortlessly "collects a spread while lying back"; it must keep paying channel costs and talent costs to sustain the network's expansion.

Fact: Dependencies. The company is highly dependent on a few key partners, especially Coinbase. Circle explicitly discloses in its 10-K that, under its Collaboration Agreement with Coinbase, Circle's payments to Coinbase are tied primarily to the net reserve income on USDC; Coinbase not only earns a share based on the USDC held on its platform but can also share in part of the residual income across the broader ecosystem. In 2025, distribution costs related to Coinbase alone reached $1.4 billion, versus $924.5 million in 2024. In the same year, distribution costs related to Binance and other partners also increased noticeably. The company further discloses that if certain regulatory and contractual conditions are triggered, it could even prompt changes in the trademark ownership and licensing arrangements between Circle and Coinbase.

Opinion: Whether this business is simple, transparent, and easy to understand. If you set aside the various long-range narratives about an "AI agent economy," the "Arc chain," and an "internet financial system," Circle's underlying business is actually not that complicated: issue stablecoins, hold highly liquid reserve assets, earn interest, and then hand a substantial share of the profit to the channels. The complexity lies not in the accounting model but in regulation, contractual revenue-sharing, the network-expansion path, and future business-model upgrades. As a value investor, I would say: I can understand the core way it makes money, but I still cannot see clearly its long-term end state. That is why I give "business understandability 4/5 rather than 5/5."

Would I be willing to hold this business if the stock market closed for five years. If the price were low enough, I would; at today's price near $114, I would not. The reason is simple: the business itself has value, but the current quote requires an investor to believe simultaneously that USDC keeps growing rapidly, that interest rates do not fall sharply, that Circle successfully builds a high-stickiness payment/developer platform, and that distribution partners do not take too much economic rent. For a company that is "still under construction," that is too many preconditions.

Industry and Competitive Landscape

Fact: Where the industry stands. The stablecoin industry is still in a phase of high growth, intense regulatory reshaping, and a competitive landscape that has not yet fully settled. CoinGecko's page shows total stablecoin market cap at roughly $318.4 billion; within that, USDT's market cap is about $189.8 billion and USDC's is about $76.9 billion. On this basis, USDT holds roughly 60% and USDC roughly 24%, with the remaining share dispersed across other stablecoins. The industry structure already shows fairly clear concentration at the top, but is still far from fully set.

Inference: This is a growth industry, but not a "comfortably mature" one. Demand truly exists on the demand side: cross-border payments, exchange settlement, DeFi liquidity, on-chain dollar settlement, institutional custody, and fund transfers all need a stable digital-dollar tool. The issue is that this industry is still easily reshaped by three forces: first, regulatory legislation; second, the re-entry of large exchanges, banks, payment companies, and tech platforms; third, substitution of some stablecoin use cases by "tokenized deposits, tokenized money-market funds, and on-chain settlement tools from brokers/banks." In other words, it resembles "the early railroad network of internet financial infrastructure" more than a mature toll bridge that has been charging steady fees for decades.

Fact: The main competitors. By product, the strongest competitor is of course Tether's USDT; by channel, Coinbase is both a key partner of Circle and can be seen as a "strong bargaining party within a shared-interest coalition"; from a traditional-payments and fintech angle, companies such as PayPal, Robinhood, and Coinbase all partly compete with or substitute for Circle in user access, compliance, payments, custody, retail traffic, or crypto distribution. Circle's advantages lie in its degree of regulation, transparency, and institutional acceptability, but it is not the largest by share. USDT's market cap is clearly larger than USDC's.

Fact: Circle's position in the industry. Circle's market positioning is clear: it seeks to become the most compliant, most institutional, and most acceptable-to-mainstream-finance stablecoin issuance infrastructure provider. On the regulatory path, Circle obtained a French EMI license early and in May 2026 expanded to custody and transfer permissions under MiCA; in the U.S., it also won the OCC's conditional approval for a national trust bank charter. By contrast, media reports show that although Tether is larger in scale and more profitable, it has long faced more questions over the transparency of its asset composition, its audits, and its regulatory framework, and S&P once downgraded its stability assessment.

Inference: Whether the industry's profit pool is concentrated and whether the company has pricing power. The profit pool is highly concentrated between top issuers and strong distribution platforms, but Circle's own "pricing power" is not strong. It does not, like Visa or Mastercard, hold a nearly irreplaceable right to charge on every transaction; its main income today still comes more from reserve yield than from high-margin software/network service fees that users actively choose to pay. Its real bargaining power comes from "trust, compliance, transparency, and institutional preference," rather than from brand premium or technological lock-in in the traditional sense. So this industry can be described as: a good track, but one that has not yet fully grown into a good business model; Circle is an important participant in a good track, but not yet the end-state winner that "collects rent while lying back."

Industry attractiveness score: 3/5. If you look at "the ten-year direction of the industry," I give it a 4; if you look at "ten years of verifiable shareholder-return quality," I lower it to a 3. On balance, I give it 3/5. This industry is worth tracking continuously, but it is not appropriate to blindly equate "a big industry trend" with "the stock being cheap today."

Moat and Management

Fact: What moats Circle has. Circle's moat lies mainly not in cost but in licensing and regulatory compliance, transparent reserve management, institutional trust, ecosystem access, and brand acceptability. USDC's reserves are backed by highly liquid cash and cash equivalents, with the vast majority held in the Circle Reserve Fund managed by BlackRock; Circle continuously discloses its reserve composition and emphasizes on its website that a Big Four accounting firm performs monthly reserve attestations. At the end of March 2026, about 86% of USDC reserves sat in the Circle Reserve Fund, with the rest as cash spread across multiple banks. For institutional customers, this transparency and compliance posture is an important barrier to entry.

Item-by-item assessment of the ten types of moat Brand advantage: present, but more a "trust brand" than a consumer brand. USDC is one of the world's major stablecoins, and its brand image in mainstream financial-compliance settings is better than most competitors'. Cost advantage: weak. Circle has no obvious low-cost seigniorage; on the contrary, it must pay high distribution costs to its channels. Scale advantage: medium. USDC is large in scale, which can support broader integration and stronger liquidity, but USDT is larger. Network effects: present, but not yet closed. More wallets, exchanges, and payment scenarios adopting USDC increases its usability; but switching costs between stablecoins are not high. Switching costs: medium-to-weak. For developers and institutions, compliance onboarding, risk control, and legal review create real migration costs; for trading users, migration costs are low. Channel advantage: present, but the channels are equally powerful. Circle can distribute via platforms such as Coinbase and Binance, but for that very reason the channels also take a large share of its profit. Patents, licenses, regulatory barriers: stronger than most crypto peers. Data advantage: some advantage, but not yet decisive. Corporate culture or operating capability: fairly strong. Its execution is evident from years of regulatory progress, reserve disclosure, and institutional partnerships. Capital-allocation ability: insufficient evidence. As a recently listed company, there is not yet a long enough track record to prove the quality of its buybacks, M&A, dividends, and reinvestment.

Inference: Whether the moat is widening, stable, or narrowing. My judgment: in institutional-compliance settings, the moat is widening; in open crypto-ecosystem settings, the moat is merely stable, not significantly widening. That is, the more Circle moves toward "banking, payments, securities settlement, corporate Treasury, and regulated cross-border payments," the more valuable its licensing and transparency advantages become; the more it moves toward "pure crypto-trading liquidity" and "retail-exchange base currency," the more it has to fight over channels with USDT, platform-coin ecosystems, or new stablecoins, and that is precisely not its most comfortable battlefield.

Fact and Inference: Difficulty of replication. Replicating USDC does not require mysterious technology, but replicating "multi-jurisdiction licenses + relationships with mainstream financial institutions + a transparent reserve system + large-scale circulation + multi-chain access + an existing distribution network" typically takes competitors many years, enormous compliance costs, and channel costs. The problem is that the potential rivals with such resources are usually not startups but large exchanges, payment giants, banking alliances, and tech platforms. So Circle's moat is not "others cannot do it," but rather "not everyone is willing to spend so much time and compliance cost to do it."

Inflation, recession, and profit resilience. Circle has no strong "pricing power" in the traditional sense; it is more a beneficiary of interest rates and scale. In an inflationary, high-rate environment, reserve yields rise, which benefits Circle; but the revenue share it pays to channels also rises in step. The company's sensitivity analysis in its annual report shows that, assuming USDC scale unchanged from December 2025, a 100-basis-point drop in interest rates would reduce reserve income by roughly $756 million and distribution and transaction costs by roughly $369 million; that is, looking at just these two items, net gross economic benefit would decline by roughly $387 million. A 200-basis-point drop would have an even larger impact. This shows that Circle does not naturally maintain high profitability in a low-rate or recessionary environment.

Fact: Management and governance. Jeremy Allaire is the founder, chairman, and CEO. The board explains that, as a newly listed company, it believes combining the CEO and Chairman roles helps strategic execution, while it has established a Lead Independent Director. The company uses a multi-class share structure, with Class B carrying 5 votes per share, but total voting power capped at 30%. As of March 16, 2026, directors and executives together held 31.4% of total voting power; Allaire himself holds a large amount of Class B shares and related exercisable interests. The company also discloses executive share-ownership requirements, a clawback mechanism, and performance-oriented compensation design.

Opinion: How I assess management. My overall assessment of Circle's management is: fairly credible, but it still needs time to prove its ability to "create per-share intrinsic value for ordinary shareholders." The good part is that the company is candid enough in discussing interest-rate sensitivity, Coinbase contract dependence, intellectual-property risk, and regulatory uncertainty; the bad part is that the dual-class structure, the combined CEO/Chairman role, and the scale-oriented incentive structure all reduce outside shareholders' voice. More importantly, what value investors care about is not "whether the vision is grand" but "whether long-term Owner Earnings per share are growing." On this, Circle has not yet delivered a long enough track record.

Moat score: 3/5. Management and capital allocation score: 3/5. The moat genuinely exists, but it is far from the "the downstream must pay, and it is hard to replace" degree of Visa, Moody's, S&P, or MSCI; management deserves respect, but for outside shareholders the governance structure is far from ideal.

Financial Quality and Owner Earnings

Financial Quality

The table below is compiled from Circle's 2025 Form 10-K, its Q1 2026 Form 10-Q, and current market-cap data; certain ratios are my own calculations from the raw statements. Because the company does not disclose a traditional "gross margin," I use Revenue less distribution costs / RLDC Margin, which the company itself also emphasizes, as a substitute closer to economic gross margin.

The data source is Circle's 2025 Form 10-K and 2026Q1 Form 10-Q; RLDC Margin, simple free cash flow, and other in-table figures are my own calculations based on the raw statements.

Fact: Growth is not bad, but profit quality must be unpacked. On revenue, Circle's 2025 total revenue and reserve income grew markedly year over year, and Q1 2026 still grew 20% year over year. USDC's end-of-period circulation rose from $43.857 billion at the end of 2024 to $75.266 billion at the end of 2025, and further to roughly $77 billion at the end of March 2026. Operating cash flow rose from $140 million in 2023 to $542 million in 2025, showing that this company is not just telling a story; it is genuinely generating cash.

Fact: But GAAP profit deteriorated in 2025. In 2025 the company swung from $157 million in net profit from continuing operations in 2024 to a net loss from continuing operations of $69.52 million, dragged down mainly by a sharp rise in compensation expenses. In 2025 compensation expenses reached $845 million, while stock-based compensation in the cash flow statement was as high as $566 million. In other words, the 2025 income statement does not reflect a failing operating engine; it was clearly suppressed by stock-based compensation expense. The issue is: for shareholders, SBC should not simply be treated as "free." It either dilutes you or turns into real cash retention costs down the road.

Inference: Is the profit real cash profit or accounting profit. If you look only at 2025 GAAP net profit, you get a "loss-making company" conclusion; if you look only at 2025 operating cash flow, you get a "decent cash cow" conclusion. Neither is complete. The more accurate statement is: Circle's cash-generation ability is real, but the "truly distributable earnings" attributable to common shareholders are significantly eroded by distribution revenue-sharing and stock-based compensation. So it is neither a pure accounting-profit company nor a cash cow whose dilution can be ignored.

Fact: The balance sheet. As of March 31, 2026, Circle's total assets were about $80.537 billion and total liabilities about $77.108 billion, a superficially very high leverage ratio; but the most important liability among them is $76.779 billion of deposits from stablecoin holders, matched on the asset side by $76.894 billion segregated for the benefit of stablecoin holders, which is essentially more like "customer float / fiduciary liabilities" than traditional operating leverage. True corporate-level interest-bearing debt is very small: at the end of March 2026, convertible debt in current liabilities was only about $36.82 million; measured by the company's own cash and investments, Circle is actually in a net cash position.

Fact: Working capital and accounting signals. The company has no inventory, so that metric is not important for Circle; more worth watching are receivables and payables. At the end of 2024 accounts receivable were about $6.418 million, rising to $62.866 million at the end of 2025 and further to $72.168 million at the end of March 2026; accounts payable and accrued expenses rose from $287 million at the end of 2024 to $361 million at the end of 2025, but fell back to $262 million in 2026Q1. Q1 operating cash flow was on the weak side, partly due to a decline in payables and payment of RSU tax withholding. Overall, I do not see evidence pointing directly to financial fraud, but I do see the characteristics of high SBC, growth investment, and working-capital volatility coexisting.

Fact: Changes in share count. Share-base expansion is a point this case must take very seriously. At the end of 2024, the company's balance sheet showed only 61.313 million Class A shares outstanding; by the end of 2025, this became 227.9 million Class A shares plus 18.614 million Class B shares; by the end of March 2026, it reached 233.6 million Class A shares and 18.715 million Class B shares. In other words, the IPO, preferred-share conversion, and stock-based compensation caused a very large jump in the share base. For value investors, this means per-share economic interest has been re-divided, and one cannot look only at total company cash flow while ignoring the per-share denominator.

Fact: Audit and accounting risk. In the 2025 annual audit, Deloitte classified "Deposits from Stablecoin Holders" as a critical audit matter, because stablecoin issuance and redemption involve complex code, smart contracts, and reserve-reconciliation processes. Audit procedures included testing mint/burn controls, reconciling reserve assets against on-chain circulation, and obtaining audit evidence directly from the blockchain via proprietary tools. My reading is: the accounting and control complexity is indeed high, but from the disclosed materials, Circle is at least trying to make this "auditable financial infrastructure" rather than a gray ledger.

Owner Earnings

Fact: Estimating in the plainest Buffett-style way. In 2025, Circle's net loss from continuing operations was about $69.52 million; adding back depreciation and amortization of $76.63 million is of course still not enough, because operating cash flow reflects more non-cash items. The cash flow statement shows 2025 operating cash flow of about $542 million; after deducting software capitalization of $56.2 million and long-term asset purchases of $12.43 million, simple free cash flow was about $473 million. Treating this figure entirely as Owner Earnings would significantly overstate the earnings truly distributable to shareholders, because it treats the high SBC as a "free lunch."

A more conservative Owner Earnings estimate I prefer a "conservative shareholder basis":

• Step one, subtract total capex from 2025 operating cash flow to get simple free cash flow of about $473 million;

• Step two, rather than treating all of 2025's $566 million SBC as a real cost or ignoring it entirely, reference Q1 2026 SBC of $51.84 million, annualized to about $207 million, and treat this as a closer-to-normalized annual dilution/retention cost;

• Step three, subtract the roughly $207 million from the $473 million to get about $266 million of "conservative shareholder Owner Earnings."

Inference: What this means. This means it is not that Circle cannot make money, but that it is still some distance from "wall-thick, steadily distributable large cash flows for shareholders." Based on the current market cap of about $30.4 billion, the simple FCF multiple is about 64x; on my more conservative $266 million Owner Earnings estimate, it is equivalent to about 114x Owner Earnings. From a long-term owner's perspective, this valuation is not cheap; indeed, it can be called quite expensive.

Valuation, Margin of Safety, and Opportunity Cost

Near the U.S. market close on May 15, 2026, CRCL traded at roughly $114.00, with a market cap of about $30.4 billion. On the surface, the market is pricing it as "future financial infrastructure"; judged by its current cash-flow structure, the market has in fact already paid for a great deal of a still-to-be-proven future.

Discounted Owner Earnings

The valuation below is not "the truth"; it merely lays out the key assumptions. The starting Owner Earnings uses the conservative range from the two approaches above, combined with scenario analysis on Circle's possible future revenue-mix improvement. All scenarios use a 10% discount rate and a 3% perpetual growth rate; the differences lie mainly in starting Owner Earnings and the growth rate over the next ten years. The starting data come from 2025 operating cash flow, capex, and the annualized 2026Q1 SBC estimate; the current share price and market cap come from the latest quotes.

The table above is my own calculation based on the aforementioned financial data and the current diluted share count. The "optimistic scenario" here already assumes that Circle successfully takes Owner Earnings to nearly double today's conservative basis and sustains 15% growth for ten straight years. Even so, the corresponding per-share value is still clearly below $114.

Relative Valuation

A caveat first: CRCL has no truly perfect listed comparable. It is neither an exchange, nor a pure payment company, nor a mature software company, and certainly not a traditional bank. So relative valuation can only be used to "gauge roughly how expensive it is," not to mechanically apply multiples. The table below mixes the latest market cap/share price with the most recent available annual-report data; some peers have fiscal-year definitions that are not fully consistent, so I focus on direction rather than the decimal point.

Data sources: CRCL, Robinhood, and PayPal annual reports, Coinbase's most recent available annual report, and the latest market data; P/S figures are my own estimates from market cap and revenue.

My interpretation Circle is not the absolute most expensive growth stock, but given its business model, which still relies heavily on spread income and must share revenue with the channels, 11x sales, 64x simple FCF, and about 48x EV/Adjusted EBITDA is still a fairly aggressive valuation. Especially when a mature platform like PayPal trades at only a low-single-digit P/S, and even high-volatility fintech/crypto platforms like Robinhood and Coinbase have more diversified revenue engines, CRCL's current valuation reflects "future expectations" more than "the quality of existing cash flow."

Asset Value and Liquidation Perspective

From an asset or liquidation-value standpoint, CRCL offers weak downside protection for common shareholders. The reason is not that it has no assets, but that most of its assets correspond to stablecoin-holder liabilities. At the end of March 2026, the company had about $76.894 billion of "cash and cash equivalents segregated for the benefit of stablecoin holders," matched against about $76.779 billion of stablecoin-holder deposits. What truly belongs to shareholders is about $3.429 billion of book equity; if you further deduct about $266 million of goodwill and about $421 million of intangible assets, rough tangible equity is about $2.74 billion, equivalent to roughly just over $10 per share. This means: this stock's downside protection comes not from hard assets but almost entirely from future earnings power.

Margin of Safety and Ideal Price

Conservative intrinsic value range: $20–35 per share. This range corresponds to the premise that Circle remains a spread-dominated issuer, non-reserve revenue expands slowly, and shareholders' truly distributable earnings improve only modestly over the next several years.

Fair intrinsic value range: $35–55 per share. This range corresponds to the premise that USDC keeps growing, Owner Earnings gradually step up, but Circle still does not fully escape its dependence on interest rates and distribution partners.

Optimistic intrinsic value range: $70–90 per share. This already embeds fairly optimistic assumptions: USDC keeps gaining share, Circle successfully builds out more network services and payment charges, and profit is not further heavily diluted by the channels. Even so, this range is still below the current price.

Discount/premium relative to the current price Relative to the fair intrinsic value range of $35–55 that I set, the current $114 is roughly 107%–226% higher; even relative to the optimistic range of $70–90, it is still about 27%–63% higher. This is the core reason for my judgment that "the current price lacks a margin of safety."

Required margin of safety, ideal buy range, and holding range If you insist on buying with a "long-term owner" mindset, I believe you should demand at least a 25%–35% discount. Correspondingly:

• Ideal buy price range: $30–45;

• Acceptable holding price range: $45–70;

• Clearly overvalued range: above $90.

This is my opinion, not a fact. What can be confirmed at the fact level is that the company's current share price is already significantly above the value range derived from existing cash flow and conservative assumptions.

Opportunity-cost comparison On May 15, 2026, the U.S. 10-year Treasury yield was around 4.60%. For a single-company stock that is interest-rate-sensitive, regulation-sensitive, and highly dependent on technology and channels, investors should demand an expected return well above the risk-free rate. Yet by my neutral scenario, the long-term annualized return implied by the current price is most likely not attractive; it may not even beat Treasuries, let alone clearly outperform a broadly diversified index fund. This is a classic case of "good story, good direction, but bad price."

Risks, Checklist, and Final Judgment

Risks and the Bear Case

The most important risks The core competitive risk is that USDC fails to keep gaining share relative to USDT, or is siphoned off by exchanges' own stablecoins, banks' tokenized deposits, and payment-giant solutions; the core technology/model risk is that stablecoins gradually become "commoditized," compressing the issuance end into a low-margin pipe; the core regulatory risk is that although U.S. and overseas rules are advancing, how much economic benefit issuers are ultimately allowed to keep, what yield or incentives they may offer users, and which forms of cooperation are permitted could all change. Circle is of course more compliant than many crypto peers, but "more compliant" does not mean "profit-immune."

The biggest financial-level risk is not traditional high leverage but the dual sensitivity of economic benefit to interest rates and revenue-sharing agreements. The annual report's sensitivity analysis already shows that falling rates would significantly compress reserve income; and in 2025 the company's Coinbase-related distribution costs alone reached $1.4 billion, showing that Circle cannot keep most of the profit from scale expansion for itself. If rates fall in the future, USDC growth slows, and revenue-sharing terms do not improve meaningfully, Owner Earnings could fall far short of the optimistic expectations the market implies today.

Governance and capital-allocation risks cannot be ignored either. Circle has a multi-class share structure, the CEO also serves as chairman, and internal and external shareholders' power is not fully aligned; more importantly, the high SBC in 2025 caused GAAP profit and shareholders' actual economic interest to diverge noticeably. Even though the 2025 SBC included IPO-related factors, if the company keeps buying growth with a high proportion of equity incentives, your "per-share value growth" as a common shareholder may not keep pace with the company's total revenue growth.

The strongest bear argument The strongest short thesis is actually quite direct: Circle is not yet a truly mature "infrastructure toll company" but an issuer highly sensitive to short-term rates and USDC balances whose profit is redistributed by channels such as Coinbase/Binance; yet the market has already priced it like a future high-quality platform company. If this bear logic is right, then CRCL's biggest risk is not short-term volatility but buying in at a price that delivers very poor long-term returns.

Which facts would overturn the investment judgment If the following facts emerge over the next two to three years, I will admit that my "too expensive today" judgment was wrong: First, non-reserve revenue's share keeps rising and clearly exceeds 20%–30% of total revenue by 2028, proving that Circle is shedding its single-spread model; Second, distribution costs as a share of reserve income keep falling, showing that scale effects are starting to return to the issuer rather than the channels; Third, conservative shareholder Owner Earnings stably exceed $600 million per year without relying on abnormally high interest rates, in which case today's valuation would look far less exaggerated. Conversely, if USDC's share stagnates or even declines, the distribution-cost ratio rises rather than falls, and non-reserve revenue never takes off, then today's investment is very likely wrong.

The biggest permanent-capital-loss scenario I believe the worst realistic scenario is not "USDC de-pegs tomorrow" but a slower, more common combination: rates fall + USDC growth slows + channels keep taking the lion's share of profit + the valuation multiple reverts from a themed stock back to a financial/payment stock. In that case, it would not be surprising for CRCL to fall back to my fair or even conservative range, implying roughly 50%–80% permanent capital-loss risk from the current price. Layer on a major regulatory shock, contract dispute, or brand damage, and the loss would be even larger.

Investment Checklist

The "Pass/Fail/Uncertain" in this checklist are my investment judgments, not facts disclosed by the company; the basis comes from the financial, governance, industry, and valuation evidence cited above.

Final Investment Conclusion

【Final Rating】 Watch

【One-Sentence Investment Thesis】 Circle is an important and promising regulated stablecoin infrastructure company, but buying CRCL at today's price is more like paying a high price up front for a future that has not yet been fully validated.

【Core Bull Case】

• USDC is one of the world's top stablecoins, and Circle sits at an important node of the digital-dollar infrastructure.

• The company is clearly ahead of many crypto peers on compliance, licensing, and transparent reserve management, giving it an institutional edge.

• Operating cash flow genuinely exists, and it improved steadily from 2023 to 2025.

• If non-reserve revenue grows large in the future, Circle has a chance to upgrade from a "spread business" to a "network-fee business."

• The industry is still early, and if regulation keeps clarifying, Circle could become one of the few compliant issuers that benefit most.

【Core Bear Case】

• 96% of current revenue still comes from reserve income, making it essentially highly dependent on interest rates and USDC scale.

• Economic benefit is significantly taken by distribution partners such as Coinbase/Binance; in 2025, Coinbase-related distribution costs alone reached $1.4 billion.

• The high SBC in 2025 shows that "cash flow as it appears" does not equal "the cash flow shareholders ultimately receive."

• The current market cap of about $30.4 billion is clearly above the value range derived from conservative-to-optimistic assumptions.

• Industry competition will keep intensifying; USDT is larger, and banks and payment platforms may join in.

【Key Assumptions】

• USDC keeps expanding its circulation over the next 3–5 years rather than being suppressed by USDT or new entrants.

• Circle can build non-reserve revenue into a substantial revenue pillar rather than forever remaining an "optional story."

• The distribution-cost ratio falls, or at least does not endlessly devour profit as scale grows.

• Normalized SBC stays within an acceptable range and does not continuously dilute common shareholders.

• Regulation leans toward "empowering compliant issuers" rather than redistributing most of the economic benefit to banks/channels/users. These are the conditions that must be met for the investment to hold, not facts that have already occurred.

【Fair Buy Price】 $30–45 per share. The basis: only by applying a sufficient discount below the fair value of around $35–55 does it better fit "Buffett-style" margin-of-safety thinking. If you are merely accepting growth optionality rather than a strict value approach, $45–70 might be where you could start a research position; but above $90, I believe it has entered a clearly overvalued zone.

【Target Holding Period】 If you really must buy, look out at least 10 years; but at the current price, I lean toward observing first and not rushing to hold.

【Expected Annualized Return】 The following returns assume you buy today at about $114 and hold for 10 years, with the market then applying a reasonable exit multiple under different end-state scenarios, roughly annualized:

• Conservative scenario: around -10% per year;

• Neutral scenario: -3% to 0% per year;

• Optimistic scenario: +5% to +8% per year.

My conclusion: against a backdrop where the current 10-year U.S. Treasury yield is about 4.6%, CRCL's current risk compensation is not thick.

【Maximum Loss Risk】 In a combination of "rates falling + USDC growth slowing + channel revenue-sharing staying high + valuation reverting," a share-price drop to $30–50 is not hard to imagine, corresponding to roughly -55% to -75% from the current price; layer on a major regulatory or brand-level incident, and in extreme cases the loss could be larger.

【Tracking Metrics】 Going forward, I will track these metrics most closely: USDC circulation; the change in USDC's market share relative to USDT; the reserve return rate; distribution costs as a share of reserve income; the share of non-reserve revenue; operating cash flow and total capex; the normalized SBC level; changes in Coinbase agreement terms; regulatory progress such as MiCA/OCC; and the actual revenue contribution once institutional partnerships land.

【Signals That Trigger Reassessment】

• Non-reserve revenue steps up significantly for several consecutive years;

• The distribution-cost ratio falls significantly;

• Owner Earnings stably exceed $600 million per year;

• USDC's share expands clearly, accompanied by accelerating institutional adoption;

• Or the opposite: USDC's share stagnates/declines, partners' take keeps rising, and regulatory rules compress returns. Once these signals appear, in either direction, they warrant a fresh full valuation.

【Reasons Not to Buy】 This part must be stated clearly: I am not buying CRCL now, not because I do not understand it, and not because I deny the long-term value of stablecoins; rather, it is because the current price requires me to believe too many optimistic assumptions at once, and at least several of those assumptions have not yet been validated by financial data. For long-term value investors, a good company does not equal a good investment; a good price is the key step that turns a good company into a good investment.

Open Questions and Limitations

This study has three main limitations. First, as a newly listed company, CRCL's publicly verifiable long-term financial history is still short, so the sample for judging capital-allocation quality is insufficient. Second, the stablecoin industry lacks a truly identical listed comparable, so relative valuation can serve only as directional reference. Third, the payment network, developer services, and AI/Arc new businesses that are most worth anticipating for Circle are still early, and I cannot discount an unvalidated story as if it were mature cash flow; this is both conservatism and a limitation.

【Final Recommendation】 Put plainly: CRCL is worth tracking but not worth an impulsive purchase at the current price. Placing it on a watchlist is more reasonable than placing it in a long-term core portfolio. The approach that truly serves long-term owners' interests is to wait for at least one of two things to materialize: either the price comes down, or the cash-flow quality goes up. Right now, neither is enough.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.