To The Moon

Every so often the market serves up a stock that resembles a Rorschach test. Some investors see tomorrow's financial infrastructure. Others see an overvalued middleman living on borrowed time.

Right now, Circle Internet is that stock.

Every moat begins as someone else's commodity

The latest catalyst was dramatic. Reports that Visa, Mastercard, Stripe, BlackRock and Coinbase are backing the rival Open USD stablecoin knocked more than 17% off Circle's share price in a single session. Yet the analyst reaction was almost surreal. Compass Point cut its price target to US$55, while William Blair maintained a remarkable US$650 valuation, arguing the market had overreacted to competitive fears.

When respected analysts looking at exactly the same company disagree by almost 1,100%, the real debate isn't about next quarter's earnings. It's about what Circle eventually becomes.

The volatility tells its own story. After listing around US$30, Circle's shares rocketed to almost US$263 before retreating to roughly US$65. That breathtaking journey perfectly captures the market's struggle to decide whether Circle is building the digital equivalent of Visa or simply issuing a product that competitors can easily replicate.

Volatility expanded faster than conviction

Growth Is Booming. Profits Aren't.

Circle's latest financials explain why investors remain so divided.

Revenue climbed approximately 64% during FY2025 to almost US$2.75 billion, continuing an impressive expansion driven by growing USDC adoption and higher reserve balances.

Yet profitability travelled in precisely the opposite direction.

The company swung from a healthy profit into a net loss, with operating income also moving firmly into negative territory. Profit margins deteriorated by roughly 66 percentage points, creating one of the sharpest disconnects between revenue growth and earnings that I've seen in a high-profile fintech this year.

That's the sort of result that leaves growth investors applauding while value investors quietly reach for the aspirin.

The explanation is deceptively simple.

Circle still earns most of its money from the reserves backing USDC. Higher interest rates have been enormously supportive. Lower rates, or higher revenue-sharing costs with distribution partners, quickly squeeze profitability.

Many investors focus almost exclusively on stablecoin adoption. Fewer appreciate that Circle's earnings currently behave much more like an interest-rate-sensitive financial institution than a traditional software company.

That distinction matters.

Commodity or Crown Jewel?

The biggest investment debate isn't whether stablecoins will become mainstream.

Most people now accept they will.

The real question is whether issuing one eventually becomes as differentiated as manufacturing bottled water.

Open USD forces investors to confront that possibility.

When Visa, Mastercard, Stripe, BlackRock and Coinbase collectively support an alternative network, dismissing the threat would be naïve. Distribution has always been one of Circle's greatest strengths, and suddenly several of the world's largest financial players are helping build another ecosystem.

Yet the bullish counterargument is equally persuasive.

Stablecoins are not social media platforms where users casually migrate overnight. Liquidity, trust, regulatory standing and deep integrations create meaningful switching costs. Circle has successfully defended USDC's market position despite an endless stream of competing stablecoins appearing over recent years.

Competition is inevitable.

Mass migration is far less certain.

Wall Street Blinked. Retail Shrugged.

The most entertaining subplot is that professional investors and retail traders appear to be inhabiting completely different universes.

While analysts debated collapsing moats and shrinking economics, retail sentiment flipped from 'bearish' to 'extremely bullish' within a single day as traders treated the sell-off as a buying opportunity. At almost the same time another analyst turned cautious, Cathie Wood's Ark funds were adding Circle shares.

It's not often you see Wall Street yelling 'fire!' while retail calmly asks whether the smoke is actually coming from someone else's barbecue.

Whether retail proves brilliantly right or spectacularly wrong remains to be seen, but it highlights just how polarising Circle has become.

The Coinbase Plot Twist

An even more fascinating subplot isn't Open USD itself.

It's Coinbase.

Circle's largest distribution partner also happens to be a founding member of the rival consortium. Their commercial agreement comes up for renewal in August, creating one of fintech's most intriguing conflicts of interest.

Many investors assume Coinbase now holds all the negotiating leverage.

I'm not entirely convinced.

Morgan Stanley believes it is 'very unlikely' Coinbase walks away from the existing distribution arrangement. After all, Coinbase still benefits enormously from USDC's success. Undermining Circle too aggressively risks weakening one of crypto's most trusted dollar products while simultaneously reducing activity on Coinbase's own platform.

Sometimes business partners become competitors without becoming enemies.

Markets often underestimate how messy — and surprisingly durable — those relationships can be.

Could Regulation Build the Moat?

The aspect I think the market still underestimates isn't technology.

It's regulation.

The recently enacted GENIUS Act, together with Circle's pursuit of a national trust bank charter, could ultimately transform compliance into a competitive advantage.

History offers an interesting lesson.

Regulation often strengthens incumbents because newcomers spend years trying to satisfy the same licensing and compliance standards. Banking, insurance and payments have repeatedly followed this pattern.

Ironically, Circle's moat may ultimately be built less by Silicon Valley than by Washington.

Susquehanna neatly captured the dilemma when it described Circle as a potential 'Globe's Digital Dollar', while simultaneously warning that its reserve-income economics 'aren't unique' and that the valuation already looks full.

Both observations can be true at the same time.

Momentum fades faster than long-term conviction

The Second Engine Investors May Be Missing

Most valuation discussions still treat Circle as a stablecoin issuer.

Management increasingly wants investors to think of it as financial infrastructure.

Circle Payments Network has already enrolled 136 financial institutions, with transaction volumes approaching US$10 billion on an annualised basis. That's still modest compared with the global payments giants, but it hints at a second revenue engine that could gradually reduce dependence on reserve income.

Then there's the early Arc blockchain initiative, another attempt to expand beyond simply issuing USDC.

Neither business is yet large enough to transform the investment case.

But they don't need to be.

They simply need to demonstrate that Circle can eventually generate meaningful fee income independent of interest rates.

If that happens, today's valuation debate changes dramatically.

Competitive Analysis: Fighting Giants Without Becoming One

Circle occupies a curious position.

Traditional payment leaders possess enormous merchant networks but lack native stablecoin ecosystems. Crypto-native competitors understand blockchain but often lack Circle's regulatory credibility. Open USD combines formidable financial backers with deep distribution, yet still has to prove it can earn the same trust that USDC has built over years.

Circle's strengths remain trust, compliance, liquidity and established adoption.

Its weakness is concentration.

Reserve income still dominates the business model, leaving earnings unusually exposed to Federal Reserve policy. Ironically, Circle's biggest competitor over the next few years may not be another stablecoin at all.

It may simply be lower interest rates.

That's considerably less glamorous than a blockchain showdown—but investing rarely rewards glamour.

Markets rarely debate what they already understand

The Future Is Arguing With Itself

Circle isn't collapsing.

Nor is it obviously cheap.

The market is wrestling with a genuine identity crisis.

Is Circle a commodity issuer whose margins inevitably compress? Or is it quietly becoming the regulated plumbing of tomorrow's digital financial system?

Both arguments contain uncomfortable truths.

The astonishing spread between analyst price targets reflects uncertainty rather than incompetence. Nobody yet knows whether regulation, distribution and trust create a durable moat—or merely delay commoditisation.

Personally, I think investors are focusing too heavily on today's reserve income and not enough on what Circle could become if Payments Network, broader infrastructure services and regulation begin reinforcing one another.

That outcome is far from guaranteed.

But neither is the bearish case.

Sometimes the most valuable thing a stock offers isn't certainty.

It's a front-row seat to the future arguing with itself.

And unlike most theatre tickets, this one occasionally loses 17% before lunch.

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