Enterprise Note: Circle Files for IPO - The Good, the Bad, the Ugly

Key Insights

• Circle has a massive addressable market. The size of potential verticals including payments, tokenized money-market funds, and margin collateral on TradFi exchanges are all very large.
• Distribution costs through partners like Coinbase have been increasing. These costs hit 60% of revenue in 2024, rising around 10% from 2023.
• An onslaught of competition is coming. Both crypto-native firms and large banks are looking to enter the space once new legislation passes, which will put pressure on margins.
• Circle’s value hinges heavily on future rates and USDC growth. An economic growth slowdown followed by more cuts than expected means downside scenarios for future revenue are particularly concerning.

Introduction

Circle states it shouldn’t be carelessly lumped in with payment companies, traditional financial institutions, or even software companies - it is an “internet platform” company. And it views its market opportunity as encompassing the entire global money supply. Is this hyperbole, or is this the long-awaited, sure-fire bet on crypto’s killer use case that everyone has been waiting for? After scrapping its IPO via SPAC in 2022, Circle finally renewed its efforts to go public in 2024 and just filed its S-1 with the SEC on Tuesday. Let’s dig in.