Investment Thesis
Circle Internet Group is the world's first and only publicly traded pure-play stablecoin infrastructure company. At $68.34 — precisely its June 2025 IPO opening-day price — the stock has given back thirteen months of fundamental progress: FY2025 revenue +64% to $2.7 billion, USDC onchain transaction volume +263% year-on-year in Q1 2026, and a $222M Arc blockchain raise backed by BlackRock, Apollo and Andreessen Horowitz at a $3 billion valuation.
Three things compressed the stock from its $299 all-time high. First, Federal Reserve cuts reducing the reserve return rate from 4.2% to 3.5% — though volume growth has consistently more than compensated. Second, the Coinbase revenue-sharing agreement, which routes roughly $900M per year to Coinbase but expires for renegotiation in August 2026 under a regulatory backdrop that has materially shifted bargaining power toward Circle. Third, the June 30 OUSD announcement — which we address directly below.
The OUSD Selloff — Our Overreaction Thesis
On 30 June 2026, Open Standard — a consortium of 140+ companies including Visa, Mastercard, Stripe, BlackRock, Coinbase, and Google — announced Open USD (OUSD), a stablecoin designed to return nearly all reserve income to its partner network. CRCL fell 17.55% in a single session, compounded by simultaneous removal from FTSE Russell growth indexes. We believe this is a material overreaction for six reasons:
"OUSD has not yet launched. It has no live supply. Its closest structural precedent — Paxos USDG, a consortium stablecoin with a similar yield-sharing model launched 18 months ago — has reached only $3 billion in supply versus USDC's $73 billion. For OUSD to threaten USDC's base within two years, it would need to grow at 25× that pace. No consortium stablecoin in history has achieved anything close to this trajectory."
- The USDG precedent. The closest live comparable reached $3B in 18 months vs USDC's $73B. OUSD would need 25× faster growth to threaten the base within two years — no precedent supports this.
- Logo membership is not live integration. ARK Invest: "Putting your name on a list is easy. Changing corporate behaviour is hard." Meta's Libra assembled a larger backer list in 2019 and never launched at scale.
- OUSD's zero-fee model may not be sustainable. Circle CEO Allaire: distributing nearly all reserve income "risks starving the infrastructure needed to run a global stablecoin network." USDC's reserve income funds compliance, multi-chain engineering, and institutional relationships OUSD cannot replicate from a standing start.
- Adoption is not yield-driven. Tether — $145B+ in supply — pays zero yield. USDC's Q1 2026 volume grew 263% YoY during a period of declining reserve return rates. Transaction utility, not yield, is the primary adoption driver.
- Standard Chartered partnership (2 July 2026). Two days post-selloff, Circle announced that Standard Chartered — a G-SIB — will offer institutional clients USDC minting/redemption. Standard Chartered is simultaneously an OUSD partner, demonstrating institutions are making bilateral bets, not exclusive defections.
- The market-cap destruction is disproportionate. CRCL lost ~$2.8B in market cap on 30 June. For this to be rational, OUSD would need to impair Circle's NPV earnings by ~$2.8B — which we cannot construct from any credible adoption scenario.
The Three Pillars of the Long Thesis
- Volume growing faster than rates are falling. Reserve return rate fell 66bps to 3.5% in year to Q1'26; USDC onchain volume grew 263% YoY in the same period. Management guides 40% CAGR in circulation through the decade.
- Coinbase renegotiation — August 2026 catalyst. The Circle-Coinbase agreement expires ~18 August 2026. OCC rule-making has weakened Coinbase's bargaining position by restricting its yield-reward model. OUSD's announcement — perversely — weakens Coinbase further. Even marginal improvement adds $100–170M to RLDC at near-100% incremental margin. The market prices in zero improvement.
- Arc blockchain is a free embedded option. $222M presale at a $3B FDV — backed by BlackRock, NYSE parent ICE, a16z, and Apollo — is entirely excluded from guidance and all consensus analyst models. Circle retains 25% of ARC token supply. Arc failure ≈ zero incremental loss from current pricing.
Key Financial Metrics
| Metric | FY2025A | Q1'26A | 2026E | 2027E |
|---|---|---|---|---|
| Revenue & Reserve Income | $2.7B | $694M | ~$2.8B | ~$3.7B |
| YoY growth | +64% | +20% | +14%E | +33%E |
| RLDC margin | ~40% | 41.4% | ~43%E | ~48%E |
| Adj. EBITDA | $582M | $151M | ~$604M+E | ~$1.0B+E |
| Adj. EBITDA margin | — | 53% | ~50%E | ~55%E |
| EPS (diluted) | ($0.18)* | $0.21 | $0.85E | ~$1.60E |
| USDC supply (EoP) | $75.3B | $77.0B | ~$105B+E | ~$150B+E |
*FY2025 GAAP EPS impacted by $424M IPO-related SBC vesting. E = Castellan estimate. Sources: Circle SEC filings, Zacks, Castellan analysis.
Scenario Analysis
| Scenario | Key assumption | 2026E Adj. EBITDA | 12M target | Upside |
|---|---|---|---|---|
| Bear | OUSD $20B+ supply; Coinbase renews unchanged; rates fall to 2.8% | ~$450M | $80–90 | +17–32% |
| Base | OUSD below $10B; Coinbase terms improve modestly; Arc mainnet in 2026 | ~$650M | $142 | +108% |
| Bull | OUSD lags USDG; Coinbase deal significantly improved; Arc gains traction | ~$900M | $200–220 | +193–222% |