Authors: Paolo@Victory Securities Partner, Andy@VDX Senior Researcher
TL;DR
Market Space: The stablecoin market relies on two core rigid demand scenarios of trading and payment, with potential for tens of times growth in the future. Stablecoins are the first crypto track to be incorporated into compliance and regulation, with compliance, institutionalization, and mainstreaming being long-term trends. In the future, stablecoin users may even exceed BTC holders, becoming crypto's biggest Killer App.
Circle's Advantages and Barriers: 1) Compliance and legitimacy: Benefiting from compliance dividends, expected to carry the on-chain US dollar expansion strategy as an "in-system stablecoin"; 2) Open infrastructure and ecosystem network: USDC supports multiple chains, cross-chain protocols, deeply integrated with exchanges and DeFi, and collaborates with payment institutions to become a hub for cross-border payments and on-chain settlement; 3) Institutional trust and mainstream capital access: Asset safety and transparency, regularly publishing audit reports, currently the only product widely accepted as an "institutional-grade stablecoin".
Circle's Risks and Challenges: 1) Revenue structure highly dependent on US Treasury interest, sensitive to interest rates and cyclical, facing pressure on income growth during US dollar interest rate reduction cycles; 2) High channel dependence, with current revenue approximately 60% shared with channels like Coinbase and Binance. Future ability to expand other revenue sources and improve channel bargaining power is key to its growth.
Competitive Comparison: The competition between USDT and USDC is essentially a competition between black and white dollars in different markets and scenarios. Tether is an "money printer", Circle is a "narrow bank". USDT relies on exchange liquidity pillars, OTC exchange, and gray payments, while USDC focuses on compliant cross-border payments, corporate settlement, DeFi, and RWA underlying currency.
Investment Analysis: As the first compliant stablecoin leader to go public after the stablecoin bill, Circle's IPO benefits from high market sentiment. However, compared to its 2024 revenue of $1.7 billion and net profit of $160 million, the current market's nearly 50x PE valuation has made an optimistic pricing, and high valuation profit-taking concentration should be cautioned. Long-term, the stablecoin track has enormous potential growth space. Circle, with its compliance first-mover advantage, ecosystem network construction, and mainstream institutional capital access, is expected to further consolidate its leading position, and its long-term development is recommended for attention.
Prelude | From Gray Arbitrage to Institutional Takeover: Stablecoins Reach a Watershed
Circle's listing marks the first time stablecoins enter the global capital market's main stage. From USDT being viewed as "casino chips" to today's USDC representing "compliant digital dollars" landing on US stocks, this is not just a commercial turning point, but a frontline of financial order reconstruction. Compliant stablecoins are no longer just on-chain circulation tools, but strategic agents for US dollar "de-banking and de-geographical" global expansion.
By 2025, stablecoin regulations in the US, Hong Kong, and other countries will successively land, and the "gray market dollars" and "whitelist dollars" represented by Tether and Circle will officially diverge. Circle's listing is not just a capitalization event in the crypto industry, but another structural upgrade of US dollar globalization, marking the starting point of compliant dollars completing financial sovereignty export on-chain.
[The translation continues in this manner, maintaining the specified translations for specific terms and preserving the original XML tags.]In the medium to long term, if traditional financial players enter the market, their traffic, user accounts, and deposit/withdrawal systems will become the biggest threat, especially in retail payments and closed system settlements (such as in-house wallets), potentially forming partial substitution. The key to success lies in: who can more quickly build a "compliant + composable + accessible" on-chain payment infrastructure and win institutional trust. Circle is already ahead, but cannot be complacent. The core is network effects, with widespread two-sided adoption. Bank stablecoins may form liquidity mutual recognition in B2B trading scenarios, but lack "neutrality" in the on-chain ecosystem and are difficult to widely invoke; accessing the neutral layer USDC is more feasible. Circle's long-term advantages: 1) Compliance + open ecosystem: Circle became a leader in compliant stablecoins through early layout, and broke through traditional financial giants' technical barriers by leveraging multi-chain and cross-chain payment platforms. 2) DeFi and RWA integration: Circle's leading position in DeFi and RWA (asset tokenization) enables expansion into high-growth areas not covered by traditional finance. Traditional finance's competitive advantages: 1) Traditional payment networks and merchant base: Traditional financial giants can quickly promote stablecoin payments, especially in retail and B2B payments, leveraging their massive payment infrastructure, merchant networks, and customer trust. 2) Fiat on/off-ramp and bank integration: Traditional financial stablecoins have clear advantages in fiat conversion and bank system integration. In RWA incremental scenarios, USDC must upgrade from a "licensed stablecoin" to a "chain system coin". BCG predicts the global RWA market will exceed $16 trillion by 2030. Stablecoins need "asset anchoring" to establish trust and expand scenarios, while RWA needs "on-chain funds" to obtain liquidity, together forming a value closed loop connecting the real and on-chain worlds. Mere compliance and reserve transparency are no longer a moat. Circle must win the dominance of on-chain payments and transaction settlement by binding RWA incremental new asset classes. Otherwise, its application layer will be continuously eroded, and its valuation ceiling will be suppressed. (The rest of the translation follows the same approach, maintaining the specified translations for crypto-related terms)However, at the same time, Circle still faces structural challenges such as income structure's sensitivity to interest rates and high channel dependence. Whether it can break free from cyclical constraints and build a second growth curve in new business expansion will determine its valuation reconstruction path. The competition between USDC and USDT is no longer a single-dimensional "market cap battle", but a full-stack competition representing the black and white dollar system, different clearing and settlement paths, and regulatory compatibility. Circle's IPO is not an endpoint, but the starting point for stablecoins to officially enter the institutionalized track globally. What is truly bet on by the capital market is not today's revenue, but whether Circle can play a key protocol layer role in the global on-chain dollar consensus system. When USDC becomes the universal circulation base of "on-chain dollars", Circle's story will truly begin.
