Circle stock price has done well after its highly anticipated initial public offering (IPO) earlier this month. CRCL stock ended the week at $133.50, a few points below the year-to-date high of $138.27. This surge has brought its market capitalization to almost $30 billion.
Circle benefiting from stablecoin demand
Circle Internet Group is a top company in the financial services industry. While it is known for the USD Coin (USDC) stablecoin, its business is more broder than that.
For one, the company also runs EURC, a stablecoin backed by the euro that is available on Avalanche, Stellar, Base, Ethereum, and Solana. It also runs USYC, a tokenized money market fund offering returns that largely correspond to US bonds. The fund has over $300 million in assets under management (AUM).
Circle also runs the Circle Payment Network (CPN), whose goal is to disrupt the financial system as we know today. When banks send money internationally, the process is often long and expensive since they deal with intermediaries and other rails.
Read more: USDC issuer Circle opens trading on NYSE after oversubscribed IPO
CPN is changing this by letting banks and other companies process payments within seconds and at a minimum cost. This technology could disrupt the financial industry as we know it today.
Circle is the second-biggest player in the stablecoin industry after Tether. Its main advantage is that it is regulated in the US and falls within the upcoming GENIUS bill.
This means that it may benefit as companies look into stablecoins. For example, instead of creating their inhouse stablecoins, companies like Walmart and Amazon could opt to use its stablecoin.
CPN could disrupt SWIFT, a network that processes trillions of dollars a year. It has already reached agreements with companies like Redotpy, Transfero, and Nuvei.
Read more: Circle stock price prediction: is CRCL a good buy today?
Circle revenues and profits
Stablecoin issuers, if successful, have one of the best business models in the world. They act like banks but don’t need to comply with all the regulations.
The companies receive money from users in exchange for a digital token. They then invest these funds in safe government bonds and earn a return. But unlike banks, these companies don’t need to share the interest payments to users.
The other benefit is that these are global companies that don’t need to operate local branches.
However, the only challenge is that its revenue depends on the actions of central banks, which they lack control about. They make more money in a period of high interest rates.
The most recent results showed that Circle made over $1.6 billion in revenue last year, higher than the previous year’s $1.45 billion and $735 million a year earlier.
This revenue growth happened as the company’s assets jumped and the Federal Reserve boosted its interest rates from zero during the pandemic to 4.50% today.
Circle Internet’s net profit came in at $156 million last year, down from $267 million.
Is Circle stock a good buy?
CRCL stock chart | Source: TradingView
Circle Internet is a good company that is in an industry expected to keep growing. Scott Bessent, the Treasury Secretary, noted that the industry could be worth over $2 trillion in the next few years. He said:
“Stablecoin legislation backed by US Treasuries or T-bills will create a market that will expand US dollar usage via these stablecoins all around the world. I think that 2 trillion is a very, very reasonable number, and I could see it greatly exceeding that.”
These forecasts mean that the Circle stock price will likely do well in the long term. The risk, however, is that it may pull back in the coming days as the euphoria phase ends and the lockup expiration period nears. If this happens, the stock could crash and then bounce back.
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