Don't Confuse 'Positive Outlook on Stablecoins' with 'Positive Outlook on Circle'

Demand scale, issuance volume, profitability, do not confuse them.

Written by: Alex Xu

Investors who are optimistic about Circle tend to discuss the potential demand scale and use cases of stablecoins. However, demand is only one part of our assessment of the viability of a business model; the remaining critical components include supply (horizontal competition) and the relationships within the industry chain (vertical supply).

When we talk about stablecoins, there are several viewpoints that seem similar but are actually quite different:

1. Optimistic about the market demand scale for stablecoins.

Verification level: Medium. Stablecoins have certain differentiated advantages over traditional payment/settlement in specific scenarios, but honestly, I cannot clearly see how large the future scale will be at this stage.

2. Optimistic about the high growth of Circle's USDC scale.

Verification level: Medium weak. Besides the potential scale of the entire market, how large USDC can grow also depends on the intensity of market competition, meaning how many suppliers of stablecoins there are, their willingness to compete, and how strong the factors limiting their entry are. Currently, it seems that compliance thresholds are lowering, and the differentiation of stablecoins in crypto scenarios is significant, while in non-crypto scenarios, it is weak.

3. Optimistic about Circle's revenue & profitability growth.

Verification level: Weak. A large issuance scale does not necessarily equate to substantial revenue/profitability. The amount of money that can be earned from a fund's settlement/transaction depends not only on horizontal competition but also on the vertical position in the industry chain. A company's strength over its upstream and downstream partners is crucial; otherwise, the issuance/transaction scale may not translate into revenue and profit, and could even lead to losses. For example, offering high commission rates or subsidies to channels to gain scale.

The demand scale for stablecoins, the issuance scale of USDC, and Circle's revenue/profitability are three separate judgments. Just as being optimistic about the market scale of the aviation industry does not mean one can be optimistic about airline stocks, even if one is optimistic about the scale of stablecoins, logically, there is still a significant gap before one can be optimistic about Circle's stock.

Most of Circle's performance Q&A actually focuses on answering question 1.

What is the truly scarce core capability in the payment industry chain that customers are willing to pay for? The image below illustrates this. It also includes compliance and anti-money laundering, etc. Currently, this is held by Stripe and Visa.

The stablecoins issued by Circle, the ARC settlement network, CPN infrastructure, and even the X402 standard are not.

As long as there is market demand and sufficient profit exists, settlement networks, financial systems, and payment interface standards can be developed by other stablecoin companies, as well as strong upstream or downstream companies in the payment industry chain, and they are indeed doing so.

Does Circle have no reason to be optimistic? There is still some. If you are optimistic about the bull market cycle and the growth of stablecoin scale in the crypto market driven by the bull market, it will subsequently boost Circle's revenue scale. This cyclical profit + valuation double impact logic is correct, as shown in the image below.

'Being optimistic' or 'not being optimistic' is merely a viewpoint; viewpoints are cheap, while logic is what can be referenced and discussed.

More logic, less opinion.

![](https://public.chaincatcher.com/upload/news/202608/2f8b20dbe1f749febdacfefa72e3fca7.jpeg