Circle Internet Group – Should Investors Jump In?

That Christ may dwell in your hearts through faith; that you, being rooted and grounded in love, may be able to comprehend with all the saints what is the width and length and depth and height— to know the love of Christ which passes knowledge; that you may be filled with all the fullness of God.

Ephesians 3:17-19

What is the essence of God’s love? As the verse states it is too difficult for me to truly comprehend, the Almighty God coming to earth in human form and dying on the cross for all the sins of humanity. God’s love makes no sense from my perspective and yet He loves all of humanity first and only asks that we accept His love so that it can permeate through our lives as a virtuous cycle to glorify His eternal kingdom.

One thing that I really connect with as a part of God’s love is His patience towards me. I find that this patience unlocks many growth and maturity opportunities in my life. The virtues of patience are highly important when it comes to managing investments, notably in today’s high-charged environment of short-term trading where valuation and multiples have completely gone out the window. While short-term volatility ebbs and flows and doesn’t require much thought or consideration, long-term success is defined by patience and perseverance.

Circle Internet Group, Inc. (CRCL) went public yesterday through a traditional IPO process and it’s been up-up-and-away. I’m a strong advocate for Cryptocurrency and digital currency and firmly believe that the financial system’s future is dependent on innovators in this space to greatly improve paramount inefficiency. But to the point above regarding patience, I do not believe that investors should be jumping into CRCL at the current stock price for a few reasons.

First, investors need to understand the genesis and evolution of Circle and USDC. Initially, it all started with a 50-50 partnership between CRCL and Coinbase Global, Inc. (COIN), and inevitably, CRCL bought out COIN’s 50% interest. With this transition, COIN and CRCL entered into a collaboration agreement and intellectual property license agreement affording COIN revenue and royalty privileges.  In essence, both companies benefit from an increase of USDC on their platforms, with most recent Q1 2025 numbers reflecting 6% and 15% respectively for CRCL and COIN. Both platforms have been growing over the past few years at the expense of non CRCL and COIN platforms.

Second, investors need to realize that CRCL generates a substantial amount of their revenue based upon the reserve return rate and average USDC in circulation. The reserve return rate is influenced by broader interest rate policies and prior to the inflationary pressures post-2022, this rate stood at only 1.5%. As interest rates have moderated modestly, this rate has begun to decline. The increase in USDC in circulation has been the primary catalyst in driving reserve income, the significant majority of CRCL’s overall revenue.

Third, CRCL pays out most of its revenue income to COIN through their distribution and transaction costs. As mentioned, COIN has scaled its USDC on its platform at a higher rate than CRCL, although the most recent quarterly data shows that CRCL has grown at a much quicker pace. Despite this, CRCL’s distribution and transaction cost percentage still marginally increased in Q1 2025 from last year.

The last point is valuation. I know that valuation is something today that most traders and retail investors discount and don’t take seriously. But valuation is always the core driver for every company over the long-term. And even during the short-term, many traders get burned as their gains are wiped out from the volatility and extreme shifts in momentum. To this point, CRCL’s valuation has reached 75 times OCF/Share which is much higher than COIN’s 33 times.

Investors should consider some of the risks associated with CRCL’s two-day stock jump. CRCL has recognized that predicting future growth in average USDC in circulation is not easily estimated; this is one of the company’s core revenue income drivers. The company also has strong dependence on COIN to grow USDC’s relevance and both companies are vying for this market and while CRCL may be growing faster now, COIN’s diversification across its leading U.S. platform afford it an arguably stronger position. This will become clearer if/when interest rates drop further serving as a headwind to CRCL’s revenue income performance, whereas COIN’s diversification will mitigate this impact.  

The run-up is likely due to investors becoming excited about CRCL’s prospects of revenue growth and the potential for USDC to increase and CRCL’s cash flow inflection. However, this focus doesn’t take into account some important elements and the stock price north of $100 per share is a more risky proposition for investors. Patience will be key as the stock markets revisit all-time highs.