Circle is best known for USDC, the second-largest stablecoin by market cap. However, behind the brand lies a business model that’s far from bulletproof.

Despite strong revenue, it faces razor-thin margins, sky-high distribution costs, and an overreliance on Coinbase that many experts say undermines its valuation.

At a glance, $5 billion might seem less. But depending on how you look at it, it might not be entirely off base.

Circle Looks Strong on Top—but Weak Beneath

Circle brought in $1.67 billion in revenue in 2024. But when you dig into the numbers, the cracks begin to show.

“Circle is a low-margin, distribution-dependent business with limited pricing power and uncertain growth,” Shane Molidor, founder of Forgd and former CEO of AscendEx, told CCN.

The company posted just $167 million in operating profit, yielding a 0.4% return on the USDC in circulation, down from 0.6% the previous year.

Gross margins have dropped from 60% to 39% in just two years, and more than $1 billion in distribution fees are dragging on performance.

Much of that drag comes from one place, Coinbase. In 2024 alone, Circle paid Coinbase 54% of its total revenue to help distribute USDC.

Its distribution model, especially its dependence on Coinbase, is increasingly seen as a liability.

“Circle relies almost entirely on Coinbase for USDC’s reach—a partnership that is both expensive and arguably non-accretive,” Molidor noted.

Despite also paying out to exchanges like Binance, Circle has failed to build any meaningful distribution on its own.

Even worse, USDC’s dominance is confined chiefly to U.S. markets, where traditional finance infrastructure is already strong and the demand for stablecoins is relatively lower than in emerging economies.

“Add to that the possibility of falling interest rates and regulatory clarity that may open the door for large banks to issue their stablecoins, and Circle’s already-thin economics become even more vulnerable,” Molidor said.

Can $5 Billion Be Justified?

Given Circle’s structural weaknesses, is Ripple’s rumored $5 billion bid a wild overestimation?

Maybe not—if the deal is structured creatively.

“At a 10–12 times multiple on operating income, a generous valuation given these structural limitations, Circle may be worth $1.7 to $2.0 billion,” Molidor said.

“What would a fair offer for the company look like? If most of the deal is structured in vested equity and tokens, $5 billion may not be entirely out of reach,” he added.

“In the short term, Circle can continue to benefit from stablecoin market tailwinds and use its IPO filing as leverage, particularly if Ripple is serious about pursuing an acquisition,” the Forgd CEO explained.

Ben Nadareski, CEO of Solstice Labs, had a more optimistic take on Circle’s potential valuation.

“Circle’s value is closely tied to its USDC reserves, with about 98% of its revenue coming from short-term securities,” he said. “Even though the company grew its revenue to $1.67 billion in 2024, its EBITDA dropped 29%, and net income also declined.”

Like Molidor, Nadareski flagged Circle’s dependence on interest rates and its massive distribution costs—more than $1 billion, with over 90% going to Coinbase—as key risks.

Still, despite the pressure on margins, Nadareski sees room for a higher valuation.

“Circle’s current performance supports a valuation of $10 billion to $12 billion. If Circle can reduce its revenue concentration risk, there’s room for that valuation to move higher,” he told CCN.

Circle Is Being Left Behind

For many experts, the bigger risk for Circle isn’t just about valuation, it’s about relevance.

Competition in the stablecoin space is heating up fast, and Circle may be losing its edge.

It’s not just Tether that’s pulling ahead. New players with better tech and sharper incentives are entering the ring, and Circle isn’t keeping pace.

“Users increasingly want stablecoins that offer both compliance and privacy,” said Rob Viglione, CEO of Horizen Labs.

“There is room in the market for a product that includes privacy and selective disclosure, yet none of the dominant issuers have addressed this demand.”

Viglione warned that unless Circle and others step up their game, they could find themselves overtaken.

“Zero-knowledge proofs make this functionality entirely feasible. At the same time, yield-bearing stablecoins… are gaining popularity for obvious reasons,” he said.

The Horizen Labs warned that if Circle doesn’t begin adding more sophistication to its offerings, “the upstarts will eat their lunch.”

The Bull Case for Circle

While some experts zeroed in on Circle’s structural weaknesses and thinning margins, others argued that the company still holds unique strategic value, especially in a regulated financial future.

Despite the mounting pressures, Circle’s position as a compliant, institution-friendly player may justify a higher price tag.

Vikran Arun, CEO of Superform, believes USDC’s evolving role isn’t about chasing DeFi yield anymore; it’s about cementing itself in the foundations of regulated finance.

“While products like SuperUSDC help recreate these flywheels, USDC’s role in DeFi has evolved largely to bootstrap other projects further down the risk curve,” Arun said.

“Ironically, USDC’s most durable role in crypto may not be as a yield vehicle, but as regulated collateral for payments and fintech rails—where it can outposition USDT on compliance, credibility, and institutional adoption,” he added.

That long-term regulatory edge could still make Circle attractive to a buyer like Ripple, especially one focused on payments and enterprise integration.

Robert Schmitt, co-founder of Cork, offered a similar perspective. “The stablecoin market likely becomes a winner-takes-most market due to the liquidity network effect of a stablecoin,” he said.

While USDT may dominate in raw trading volume and emerging markets like Asia, Schmitt sees USDC holding the line in more regulated jurisdictions:

“In several key geographies, like the U.S. and Europe, USDC is well-positioned as the winner,” Schmitt said.

Still, even Circle’s champions acknowledge the fight is far from over. “USDC will face increasing competition from financial institutions launching their stablecoins (like PayPal), because it is profitable to capture the yield from stablecoin deposits,” he added.

Was this Article helpful?


Yes



No