Circle: Sell When Investors Are Greedy

Summary Circle’s IPO was a massive success, with shares soaring 674% since June 5, 2025, fueled by regulatory wins like the GENIUS Act. Circle is highly profitable, with strong adjusted EBITDA and net income growth, mainly from stablecoin reserve income. Despite strong fundamentals, Circle’s shares are extremely overvalued at a 127.9X forward P/E, far exceeding Coinbase’s valuation. Given the euphoric rally and stretched valuation, I recommend selling Circle shares and taking profits before a potential correction. Shares of the Circle Internet Group (CRCL) have soared after the company’s IPO earlier this month on renewed optimism about the cryptocurrency sector. Favorable stablecoin legislation approved by the U.S. Congress last week added to Circle’s massive share price rally, with the company adding 20% to its market cap just on Friday. Shares, however, seem to be overbought now and the recent explosive price rally exposes investors to the risk of a downside correction. While Circle is profitable on both an EBITDA and net income basis, shares of the blockchain technology company are massively overpriced, and I would recommend investors to sell the greed and take profits. Data by YCharts An overpriced play on the cryptocurrency market Circle is a financial technology company and stablecoin issuer that develops crucial blockchain technology that is needed in order to facilitate rapid digital payments. Circle is the issuer of USDC ( USDC-USD ), the second-most circulated stablecoin after Tether ( USDT-USD ), and therefore a critical pillar of the digital currency ecosystem. Stablecoins are an important element in the cryptocurrency market as they minimize price volatility and allow users to redeem stable coins for US Dollar on a 1:1 basis. With stablecoins being pegged to the value of the US Dollar, stablecoins not only limit excessive price swings in the notoriously volatile cryptocurrency market, but they also help users lower transaction costs and help issuers to earn a return on their reserve assets. The almost nonexistent price volatility of stablecoins is related to the fact that their values are backed by real US Dollars held as reserves. Issuers like Circle and cryptocurrency exchanges like Coinbase ( COIN ) earn a share of the return on the reserve assets (US Dollars) which are invested in interest-producing income instruments. Global X ETFs Stablecoins have soared in popularity in recent years, in part because adoption of cryptocurrencies is growing and the U.S. government has declared its goal to make the U.S. the Bitcoin capital of the world. With growing adoption and a rising capitalization in the stablecoin market, Circle’s IPO just came at the right time… CNBC The assets underlying stablecoins earn issuers recurring income. Circle, as an example, generated the majority of its revenue from “reserve income” and it represented 96% of the company’s total revenue in the first fiscal quarter. Reserve income has also consistently been the biggest block of Circle’s revenue mix over time. What stands out from Circle’s last S1 registration filing — which includes current and historical financial statements — is that Circle is already widely profitable on both an adjusted EBITDA and net income basis. In Q1’25, the blockchain technology firm and stablecoin issuer generated $122.4M in adjusted EBITDA, showing 61% year-over-year growth. Circle translated about half of these EBITDA earnings into net profits. In Q1’25, the enterprise earned $64.8M in net income, showing 33% year-over-year growth. Circle Compared to Coinbase, stablecoin issuers like Circle have much higher risk associated with their revenue models than cryptocurrency trading platforms, which often benefit from increased market volatility for digital assets (volatility benefits trading revenue). Although cryptocurrencies like Bitcoin and others can be highly volatile, stablecoins themselves are pegged to the USD and therefore have practically no volatility to speak of. Coinbase and Circle co-founded USDC in 2018, a stablecoin that is fully collateralized by U.S. Dollars. As opposed to Circle, however, Coinbase runs a much more diversified business model with income coming in from multiple sources, including Blockchain rewards, interest and fee income as well as transactions-linked (trading) activity. In the first-quarter, Coinbase’s stablecoin-related revenues represented only a revenue share of 15%, so the trading platform has much less exposure to the stablecoin part of the crypto business than Circle. Further, Coinbase gets paid fees for the amount of USDC held on its platform (on average, users held $12.3B in USDC on the platform in Q1’25). The more popular USDC is (the higher the market cap is), and the more accounts hold USDC, the more money a stablecoin issuer has to pay to Coinbase, which poses an earnings risk for Circle. USDC currently has a market cap in excess of $61.0B and has increased by about 88% in the last year. Coinbase Another risk for stablecoin issuers like Circle is slowing stablecoin adoption. While USDC adoption is currently rising (as seen by a surging market cap), other stablecoins may emerge in the future, founded by other alliances between blockchain companies and trading platforms like Binance, for example. Further, synthetic stablecoins that don’t hold any underlying reserve assets may increase in popularity as a more cost-effective way to crowd out ‘standard’ stablecoins. Any challenge to the currently existing stablecoin model would therefore also be a fundamental challenge to Circle’s business model. Strong IPO performance Circle completed its widely expected IPO earlier this month, which has been a massive success so far and exceeded investors’ wildest expectations. Circle’s shares soared right out of the gate on June 5, 2025, when the stablecoin issuers shares were listed on the stock exchange for the first time: shares were priced at $31, but immediately surged to $69 per-share, with further price momentum benefiting early investors. Further, Circle’s shares benefited from the recent approval by the U.S. Senate of new stablecoin legislation, dubbed the GENIUS Act, which stands for Guiding and Establishing National Innovation for U.S. Stablecoins Act. The GENIUS Act is an important piece of legislation that seeks to establish regulatory clarity for stablecoin issuers and users. The GENIUS Act is part of an overarching regulatory drive of the U.S. government to legitimize digital currencies and blockchain technology, and further their adoption. Another major beneficiary of the GENIUS Act has been Coinbase, which runs a major cryptocurrency marketplace where retail and institutional investors can trade a variety of digital currencies. I covered Coinbase in my work last November 2024: A Directional Bitcoin Bet . Circle’s valuation After a 674% increase in valuation (calculated from Circle’s $31 per-share IPO price), shares of Circle are now extremely highly valued. Considering that the company added yet another 20% to its market cap on Friday following news about the U.S. Senate approving of the GENIUS Act, I believe that the pendulum has swung too far in the direction of euphoria. Circle’s valuation is now also extremely stretched and may be at risk of correcting to the downside. Shares of Circle are currently valued at a forward (FY 2026) price-to-earnings ratio of 127.9X, which compares to 37.7X for Coinbase. This makes Circle’s earnings about 3.4X more expensive than Coinbase’s and indicates that the blockchain technology’s companies shares may be overvalued at this time. I rated Coinbase’s shares a strong buy in my last work on the cryptocurrency marketplace, amid strong adoption trends and positive price momentum for Bitcoin ( BTC-USD ). However, with Circle now trading at more than 120X forward earnings, I believe the company’s valuation more than fully reflects the company’s earnings position and legislation-driven expansion of the stablecoin market. I believe a ~50X P/E ratio could be justified given the fast EBITDA and net income growth… which implies a fair value of $78 per-share, which is about 68% downside revaluation potential. High-growth companies with considerable earnings upside and strong market positions, like Circle and Coinbase, could trade at premium earnings multiples, in my opinion. However, the current valuation seems excessive and chiefly sustained by extreme investor bullishness. Coinbase, as an example, last year had a 3-year average P/E ratio of ~50X which is why I recommended the cryptocurrency marketplace at a price of $296 per-share, with a fair value of $375 per-share. However, Coinbase has traded significantly above 50X forward earnings during market periods of very bullish market sentiment… a time that bears resemblance to what is going now on in the stablecoin market. Since Circle is expected to generate $1.56 per-share in earnings next year, on a consensus basis, applying a 50X earnings multiplier yields an indicate fair value of $78 per-share. Seeking Alpha Risks with Circle Blockchain technology, digital currencies and stablecoins are going to be a central part of our digital financial ecosystem going forward. However, digital currency prices can be extremely volatile and while adoption is growing, extreme price corrections for digital assets like Bitcoin or Ethereum ( ETH-USD ) make the crypto sector a high risk-sector. An exception is stablecoins, which are collateralized by U.S. Dollars, but because the stablecoin sector is woven into the broader crypto-economy, declining investor interest in digital assets could also a negative impact on stablecoin issuers like Circle (although not on the stablecoins themselves). What would change my mind about Circle is only a massive price correction to the downside, where the valuation is more connected to the company’s underlying fundamentals. Final thoughts The IPO of Circle was a massive success. Shares have returned an incredible 674% return since June 5, 2025, and the recent news about the U.S. Senate approving of the GENIUS Act, which establishes a regulatory framework around stablecoins, is a major win not only for Circle, but for the entire cryptocurrency industry. However, with shares now being valued at an excessive 127.9X forward earnings and investors earning a multiple of their invested capital in a matter of weeks, I believe this may be a great time to sell into the strength. Investors are clearly extremely greedy right now, and the risk profile has therefore profoundly changed to the negative last week.

Source: Seeking Alpha