Since going public on June 5, it's been pedal to the metal for the stablecoin issuer Circle (CRCL 12.07%), which has seen it's stock absolutely explode in just a few short weeks. The company priced shares at $31 per share, or a roughly $6.8 billion valuation.
However, once hitting the open market, shares of Circle jumped to $69 and at one point topped $103 per share. As of June 24, shares of Circle had jumped to $248 or a nearly $56 billion market cap, up 700%. After such an incredible run, can you still buy the stock?
How big can stablecoins be?
Circle is the issuer of the stablecoin USDC (USDC -0.01%), which is the seventh largest digital asset with a $62 billion market cap. Stablecoins are digital assets pegged to a currency or commodity; USDC is pegged 1-for-1 to the U.S. dollar. Circle also has other products, like EURC, a stablecoin pegged 1-to-1 to the euro.
Image source: Getty Images.
The idea of stablecoins is to take advantage of the ingenious technology behind the blockchain while removing the volatility typically associated with cryptocurrencies. Using digital assets, people are able to transfer money seamlessly to anyone with internet access, even if they don't have a bank account.
This makes stablecoins very useful for cross-border payments and for potentially helping the underbanked population. Circle supports wireless transactions for minting and redeeming USDC in more than 185 different countries.
The company's business model and strategy are fairly straightforward. Circle wants to increase the popularity of USDC and EURC and the general use of stablecoins. It plans to partner with financial institutions to provide as many on-and-off ramps as possible, where people can easily transfer between fiat currencies and stablecoins.
Recently, Circle took a big step in that direction by announcing a strategic partnership with Fiserv, one of the major players providing core processing capabilities for thousands of banks all over the world. The partnership aims "to jointly explore and develop stablecoin-enabled solutions for financial institutions and merchants within the Fiserv ecosystem."
Circle makes money through the dollar reserves it holds for each stablecoin, on which it earns a yield. The yield it earns has historically been a small discount to the Secured Overnight Financing Rate (SOFR), or the rate at which banks lend very short term to each other.
The company will increase revenue is by increasing reserves, which grow through more use of its stablecoins. Circle's revenue exploded from $772 million in 2022 to roughly $1.45 billion in 2023. In 2024, revenue grew at a slower rate to $1.68 billion.
Circle generated nearly $156 million in profit in 2024. In the first quarter of 2025, Circle reported close to $579 million of revenue and a profit of nearly $65 million.
Recently, Circle received good news when the U.S. Senate passed a bill that would establish a formal regulatory framework for stablecoins. In the world of digital assets, anything that can provide regulatory clarity tends to be viewed positively. Furthermore, Seaport Global analyst Jeff Cantwell also initiated coverage on Circle and assigned the stock a buy rating.
"On the back of an improving regulatory climate, we expect adoption globally of stablecoins such as USDC, Circle's flagship product, grows rapidly from here -- we see the stablecoin 'market cap' potentially reaching $2T over the longer-term, from roughly $260B today," Cantwell wrote. He expects the total stablecoin market to reach $500 billion and that Circle's revenue can grow 25% to 30% per year.
Should you still buy Circle at a monster valuation?
I find stablecoins to be intriguing. They seem to be growing in popularity, and Circle's partnership with Fiserv could open up the door to thousands of new financial institutions. However, the company's problem is that it now trades at a monster valuation. If you annualize Circle's first-quarter numbers, that means the stock currently trades at roughly 215 times Circle's 2025 earnings and 24 times 2025 revenue.
Investors should be aware that it could take time for traditional banks to adopt any kind of stablecoin product. Traditional banks are conservative, and instant payments still present challenges, like how to deal with fraud.
Furthermore, if the Federal Reserve lowers interest rates, it could cut into Circle's revenue because SOFR is influenced by interest rates. In the fourth quarter of 2024, Circle's rate on its reserves was about 4.5%, but that rate was as low as 0.14% in the first quarter of 2022.
Stablecoins may very well be the future, but Circle's huge run means investors are already assuming enormous growth in the stablecoin market. If this turns out not to be the case or competitors take market share from USDC, Circle's stock could take a hit.
At this valuation, I'm not ready to buy just yet. I recommend interested investors practice dollar-cost averaging, which will smooth out their cost basis over time.
