What Circle and Coinbase Trading Patterns Tell Us

But the Lord is faithful, who will establish you and guard you from the evil one.

2 Thessalonians 3:3

As a Christian, it is always more amenable and refreshing to talk about the life of Jesus Christ and His love towards humanity. But as Thessalonians states, the purpose of knowing Jesus Christ is to have protection and assurance against the evil one, also known as satan or the devil. The Bible clearly speaks to the spiritual realm and the battles that ensue between God’s angels and satan and his demons. God’s ultimate desire is for everyone to accept His offer of salvation to resist the temptations of sin, without God’s protection, there is no way to escape satan’s influence.

Like God serving as the ultimate guardrail for me, it is important to institute guardrails to effectively manage my investments. Spiritual growth and maturity are evidence of putting the Lord’s guardrails into practice; the same can be said for investment strategies and management through improved diligence, patience, and execution.

For those who have not noticed, Circle Internet Group (CRCL) and Coinbase Global, Inc. (COIN) have had a very extreme trading relationship since CRCL went public. Both stocks have traded in correlating trends for the most part, but CRCL has tended to see a much higher performance to the upside, and more recently the past few days have witnessed consecutive inverse trading patterns. Since going public, CRCL is up 139% from its first completed trading day (13-trading day period), and COIN is up 46% respectively. While CRCL has emerged the short-term winner, COIN is arguably the better investment option over the mid-term.

Much of CRCL’s meteoric rise has been driven by increasing optimism for digital currencies and Cryptocurrencies more broadly, including the U.S. Senate’s passage off the GENIUS Act. The legislation provides a framework to regulate digital tokens that are pegged to the value of the U.S. dollar and further legitimizes cryptocurrencies. The bill's requirements include full reserve backing for issuers, monthly audits and anti-money laundering compliance, among other regulations.

I was considering purchasing CRCL in the mid-$80s but did not as I was in need for more time to perform further diligence. As I’ve reviewed the agreements between CRCL and COIN and scrutinized upside potential more thoroughly, based on the fundamentals I have become less bullish on CRCL, especially as the current stock price still affords the company a three times greater SP-OCF/Share multiple versus COIN.

The last two days, CRCL’s stock price has dropped 34% from Tuesday’s intraday high. Analysts have raised concerns regarding CRCL’s primary exposure to USDC versus more digital currency competition that could be on the horizon. CRCL and COIN have agreements that dictate degrees of revenue recognition based upon USDC volume, assets on respective platforms, and other parameters. For me, CRCL’s risks including unknown digital currency competition, lack of clarity of relative performance of USDC revenue versus COIN and slowing USDC in circulation all have tempered my interest in CRCL, notably at these much more excessive valuation levels.

There are a couple of areas where CRCL can see an accelerating increase in the company’s revenue. First, an increase in circulating supply of USDC as CRCL’s reserve income revenue is derived from the average USDC in circulation during a particular period. As of Q1 2025, USDC in circulation was $60 billion and the average for this period was $54.1 billion. CRCL’s reserve income revenue is the product of the average USDC in circulation and the reserve return rate. Essentially the greater the increase in USDC circulation, the stronger CRCL’s reserve income revenue performance. Recently though, the reserve return rate which is tied to interest rates and federal reserve policies, has been on a downward trend from recent peaks.

Second, CRCL per the company’s agreement with COIN, pays out distribution and transaction costs to COIN that is determined by numerous factors including USDC assets on platform, among others. It is to this point that CRCL has witnessed accelerated growth in its USDC assets on platform at a higher rate than COIN.

Despite this being the case, CRCL’s revenue excluding distribution and transaction costs has essentially been flat since 2023, while COIN has continued to witness an increasing amount of stablecoin revenue resulting from the CRCL arrangement. This performance creates less clarity as to who the biggest benefactor over time will be. Additionally, USDC circulation stands at just below $62 billion reflecting a less than 3% increase from the prior quarter that will translate to an equally lower average USDC in circulation rate of growth from the prior year’s overall results.

CRCL is an interesting investment consideration based upon the expectation for continued growth with digital currencies including USDC. The company has a very strong cash flow margin at its current level. But the current valuation levels (140 times SP-OCF/Share and 23 times EV/Sales) create a very risky proposition as CRCL has not proven that it has a substantial advantage to outperform its digital currency peers. This is most evident with COIN, as to date, COIN has been the biggest benefactor of the increased circulation in USDC both for assets on platform and through stablecoin revenue.

CRCL and COIN’s trading patterns indicate increasing optimism for digital and Crypto currencies. But CRCL’s substantially stronger stock performance is cause for concern as COIN’s greater diversity may continue to serve as a stronger business model. Investors interested in CRCL are best suited to taking a wait-and-see approach.