The company behind USDC stablecoin, Circle has officially filed for an IPO earlier this week with a rumored valuation between $4 billion and $6 billion. The move is being closely watched across the crypto and fintech sectors, as many view it as a potential turning point for stablecoins and broader market confidence.
While analysing Circle’s insights, Lorenzo Valente – the Director of Crypto Research at ARK Invest – shares an in-depth report and provides sharp details into the company’s financials, competitive positioning, and the IPO’s broader implications.
According to Lorenzo, Circle’s revenue has risen 15% in 2024 – from $1.45 billion to $1.68 billion – driven largely by an 80% jump in USDC’s circulating supply which is now sitting at $44 billion. However, the firm’s net income has fallen 42% to $157 million, while adjusted EBITDA dropped 28% to $285 million. This signals increased cost pressures on the company.
With his analysis, Lorenzo notes out a key issue with Circle’s distribution costs. Out of $1.7 billion in revenue, $1 billion went to distribution with $900 million paid to Coinbase, one of the largest crypto exchange which is also Circle’s main partner. The partnership terms allow Coinbase to take 100% of interest revenue from USDC held on its platform, and split 50/50 with Circle on USDC held externally.
Recent estimates suggest that Coinbase profited around $600 million from Circle-related revenue last year, representing nearly 25% of Coinbase’s current $42 billion valuation.
“Distribution dynamics are critical,” said Lorenzo, adding, “Coinbase is capturing a significant share of Circle’s earnings, which compresses Circle’s margins and limits its upside.”
At a projected valuation of $4 to 6 billion, Circle’s EBITDA multiple would be 13x to 20x – in line with fintech peers like PayPal and Block, but lower than payment giants like Visa or Mastercard.
“This isn’t a cheap IPO,” Lorenzo notes. “Circle’s declining profitability and dependency on interest rates make it look more like a cyclical crypto business than a high-margin payments platform.”
On the other side, Tether – the issuer of USDT stablecoin and Circle’s main competitor – made $13 billion in net income last year, compared to Circle’s $220 million. This is 4x increase despite having only 3x the supply. With minimal headcount and no costly distribution partnerships, Tether generates 20x more income per dollar issued.
“Tether’s lean model and focus on emerging markets, especially via Tron, have made it incredibly profitable. If Tether ever enters the U.S. market under a new entity, Circle could face real trouble,” Lorenzo stated.
The analysis warns that interest rate declines, potential entry of major banks into stablecoins, and shrinking margins could threaten Circle’s long-term viability. However, there is still an opportunity for Circle to stand out.
“If Circle can evolve into a high-margin network like Visa, it may deserve a much higher valuation,” Lorenzo says, “The IPO is a critical moment for Circle to redefine itself – not just as a yield play, but as core infrastructure for the digital economy.”
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