Circle is so far ahead of its competition with the largest circulating stablecoin ($61B+) in the US, compliant, and fully audited. Because of its size, it has the advantage of network effect with over 5.7 million wallets using it, peaking with $1 trillion dollars of transaction volume in Nov 2024, over 18 major blockchain supports, and strong partners like Coinbase, Shopify, Binance, Fiserv, etc. While tokenization is as easy as creating a memecoin, the operation of a large platform like Circle's requires both the technological expertise and the regulatory support (financial and time) needed to be legally compliant in the US to operate at the highest level with top partners.
I will explain my long term thesis for Circle Inc and address its moat, and risks. You will find there are a lot of insights drawn from direct experience in product and finance that others do not talk about.
CRCL (Circle Inc.) is a publicly traded company focused on blockchain payment technology and cryptocurrency services. The company is best known for issuing USDC, a popular stablecoin pegged to the US dollar.
Key Business Aspects
I am uniquely positioned to understand Circle deeply because I have been a product & engineering leader in the crypto space since 2019, having raised millions for my startup, and also worked as a product leader on platform companies and major crypto companies. I also have a strong background in engineering, particularly in payments and commerce, to analyze the quality of the underlying technologies. I can go as deep in any direction as possible but I will keep to the main points on this document. Other questions are welcomed to be discussed.
First I think it’s important to note that Tom Lee calls it a god-tier IPO and devoted his whole thesis on $BMNR on adding ETH to support the stablecoin business.
Circle’s IPO is god-tier — Tom Lee
On TAM: Bessent says stablecoins could create $2T of demand for US Treasurys. Treasury Secretary Scott Bessent claims that "stablecoins could grow into a $3.7 trillion market by the end of the decade.”
Q2 Reserve income - 96.4% revenue $634m (50% YoY) - Q2 Other revenue (subs, services, transactions) 3.6% $23.8% (252% YoY) Q2 RDLC (Revenue Less Distribution Cost) margin: 38%
The biggest bear argument is "competition." Tokenizing a stable currency is easy; anyone can do it. Big financial institutions such as JPM, PayPal, Visa, and Amex are the biggest competitors to spinning up new stablecoins. Tether, the largest stablecoin, will enter the US market and eat away the profit margins from Circle's.
Yes, tokenization itself is easy, it's as easy as creating a memecoin. This is a surface level argument. Let's take a product approach: Facebook, Twitter, Instagram, WhatsApp are easy to create on a weekend at a hackathon, but why does everyone use them? I spent many years in social platforms both as product & engineer. Many of my coworkers went to work for Facebook, Twitter/X, and WhatsApp. There's a fundamental concept to platforms called "network effect." To put it simply, you're using Facebook because your friends are on it. And you're using X because it's the only place where you can consume this kind of content. Certain products increase in value as more users join the platform with more participants: 1) access to large user base such as your friends, social group 2) more content from the user base. On technology front, as the user base scale like on Facebook, it requires incredible expertise to build systems that scale well hence Facebook hires the best engineers in the world. Companies that have not proven scale like Circle eventually will face the tech scaling problem.
For Circle, as the second largest stablecoin, they already have 5.7 million wallets accessing USDC, growing at 68% YoY. More users, means more tokenized assets, more price efficiency, more users & merchants accepting it.