Circle Internet Group (Derivatives) (CRCL)

Wu reported that, according to Simply Wall St, Circle (NYSE:CRCL) was removed from several major Russell Growth Indexes in the Russell's annual reconstitution on June 26, including the Russell 1000 Growth Index, Russell 3000 Growth Index, and Russell Midcap Growth Index. This could cause institutions and passive funds tracking these benchmarks to reduce holdings of the stock, affecting its trading liquidity. Simply Wall St analysis notes that CRCL's stock price fell 32.8% over the past 30 days, reflecting selling pressure from the index reallocation. Additionally, following competitor Open Standard's launch of the alliance stablecoin Open USD, CRCL's stock fell to $62 today, a 16.55% decline over 24 hours. https://t.co/6rIg87sHPY

Back then many people were hyping CRCL; I said it’s not bad, but there’s no need to idolize it.

The real barrier for stablecoins isn’t issuing tokens, but liquidity, compliant entry points, payment use cases, distribution capability, and ecosystem integration.

Now giants like Visa, Stripe, Mastercard, Coinbase, and BlackRock are planning to jointly launch OUSD, which essentially validates my earlier judgment:

Once the profit model of stablecoins is confirmed, traditional finance and payment giants will step in personally.

This is a positive signal for the stablecoin industry, indicating the sector’s gold content is rising.
But for a token like CRCL that the market has already priced in advance, it creates valuation pressure.

So it’s not that stablecoins are unviable.
It’s that the market previously over‑idolized CRCL.

My view has never changed:
Being bullish on the sector does not mean blindly chasing a single over‑priced token.

The development of any thing requires time to settle repeatedly. Truly valuable opportunities are rarely priced in an instant; they are realized gradually through long‑term validation.

🧐 What is Circle falling from? Does its moat still exist?

First, the result: I believe $CRCL is oversold in the short term; if market sentiment drives further overselling, I would consider buying a portion,

However, I currently lack the confidence to hold it long term and may need more observation.

Because the fundamentals and moat have clearly undergone massive changes, which I detail below!

I've been pondering a question:

What exactly constitutes a true moat for a company?

Today, the stablecoin sector Open Standard announced the launch of Open USD, a new stablecoin backed by over 140 companies including Visa, Stripe, Mastercard, BlackRock and Coinbase.

Investors are assessing the competitive threat it may pose to USDC.

The resulting sharp decline is a compelling topic to consider regarding moats!

1️⃣ What exactly is $CRCL falling from?

Open Standard officials state that Open USD is designed as follows:

Enterprises can mint/redeem at zero cost with no manual scale limits; partners receive the reserve asset earnings of Open USD after a small management fee; governance is jointly decided by the independent company Open Standard and a partners' board.

The participant list includes many payment, finance, technology, and crypto infrastructure firms such as Visa, Stripe, Mastercard, American Express, BlackRock, BNY, Google, Shopify, Coinbase, Solana, Base, Ripple, etc.; Stripe also publicly stated that Open USD will be the default stablecoin for Stripe's business users;

The implication is clear: Open USD is not attacking USDC via technical parameters, but through allocation mechanisms.

Circle's core profit pool comes from reserve asset earnings; Open USD's core slogan is to return a larger share of that revenue to traffic‑generating partners.

In other words, OUSD intends to share the economic benefits previously captured by Circle with Visa, Stripe, Shopify, Coinbase, banks, wallets, exchanges and merchant ecosystems to quickly acquire users.

The "USD 1:1 + on‑chain transfer" technology of stablecoins is not the deepest moat; the true moat lies in trust, regulation, liquidity, distribution, integration, use cases, and economic incentives. Now the wolf is here, and another possibility emerges.

Thus, I think the representative point here is:

A single technology is not a moat; the ability to continuously translate it into irreplaceable products and profits for customers is the moat.

I have discussed this theme many times with friends; Buffett rarely invests in tech firms, preferring consumer staples, because he understands how quickly moats in tech can change.

2️⃣ Has Circle's fundamentals changed?

Actually, no!

USDC has not lost its peg due to today's news, nor has Circle's reserve shown any sudden issues.

Circle CEO Jeremy Allaire @jerallaire posted on X that USDC remains the "most trusted, most widely adopted, and best institutional‑ready stablecoin globally."

He said Circle will continue expanding its ecosystem among banks, payment firms, capital market companies, and enterprises, while providing partners more ways to become "economic stakeholders" in USDC network growth.

Additionally, Circle's Q1 2026 report shows USDC ending circulation of $77 billion, up 28% YoY; Q1 on‑chain USDC transaction volume of $21.5 trillion, up 263% YoY; Q1 total revenue and reserve revenue of $694 million, up 20% YoY; adjusted EBITDA of $151 million, up 24% YoY.

DeFiLlama currently shows USDC market cap around $73.88 billion, still the second‑largest stablecoin;

But where did the change happen? Why such a drop?

Because expectations of fundamentals have clearly shifted.

Stock pricing looks beyond today's earnings to future cash flows, growth rates, profit margins, and moat durability.

In 2025, 96% of Circle's revenue came from reserve income; its 10‑K states reserve income is driven mainly by stablecoin circulation and reserve yield.

This means any factor affecting USDC circulation, reserve‑earnings sharing ratio, or partner bargaining power will impact CRCL's long‑term value.

3️⃣ Is the moat still there? Yes, but re‑priced.

I've heard many analyses of Circle's moat, and my own study leads me to think it has at least four layers:

The first layer is trust and regulatory brand.

Circle's USDC reserves are largely held in the Circle Reserve Fund, managed by BlackRock and custodied at BNY; Circle also discloses transparency reports on reserve assets. This is important for institutional clients, especially as the U.S. regulatory framework becomes clearer.

The second layer is existing liquidity and network effects.

USDC already has hundreds of billions of dollars in circulation, numerous trading pairs, DeFi integration, on‑chain wallets, enterprise APIs, and developer familiarity. Stablecoins cannot be fully replaced by downloading an app; many use cases depend on deep liquidity, trading pairs, risk controls, accounting, compliance, and upstream/downstream integrations. Circle's Q1 disclosed USDC accounted for 63% of stablecoin transaction volume that quarter, indicating strong usage.

The third layer is operations and banking infrastructure.

Issuing a stablecoin is not trivial; it involves minting, redemption, reserves, audits, compliance, banking relationships, on‑chain security, cross‑chain, blacklists, and regulatory requirements. Circle partnered with Coinbase in 2018 to launch USDC, and in 2023 updated the agreement granting Circle sole governance of the stablecoin network; Coinbase continues to support USDC in deposits/withdrawals and client products, while Circle pays Coinbase a share of net reserve income.

The fourth layer is platformization attempts.

Circle aims beyond being just a USDC issuer; it also builds infrastructure like Arc, CPN, Circle Wallets, Gateway, Agent Stack, USYC, etc. In Q1 2026, Circle reported CPN's annualized volume around $8.3 billion and continued launching Managed Payments and other products. If these become indispensable "financial operating systems" for enterprises and developers, Circle's moat will thicken.

But the issue is clear: these moats are mostly strong usage inertia, not strong pricing power.

Understanding this sentence is crucial!

It means stablecoin users ultimately want cheap, reliable, redeemable, compliant, and integrable solutions.

Merchants aren't necessarily loyal to USDC, payment platforms aren't either, and exchanges can support multiple coins.

Open Standard's approach pulls all distributors in, turning them from "help Circle distribute USDC for a cut" into "co‑own a stablecoin network and share reserve earnings." This weakens Circle's bargaining power over channels.

Thus Circle's moat remains, but it shifts from a "wide moat" to a "moderate moat + high competitive pressure."

It is not a Coca‑Cola type brand that consumers naturally choose daily, nor an Apple‑like hardware‑software ecosystem lock‑in. It's more akin to an early financial infrastructure platform: it has first‑mover, trust, scale, and compliance advantages, but once large distribution channels unite, the profit pool gets re‑allocated.

4️⃣ Why is the market reaction so large?

Because the news directly attacks CRCL's three most sensitive variables: USDC circulation, net split rate, and ultimate profit margin.

Circle's business formula can be simplified to:

Profit potential ≈ USDC circulation × reserve yield × Circle retention ratio − operating costs

Circle disclosed that a 100‑basis‑point rate drop, under the assumed 2025 scale, could reduce reserve income by about $756 million and cut distribution and transaction costs by about $369 million;

This implies a multi‑hundred‑million‑dollar impact on net economic benefit, showing CRCL is highly sensitive to rates and stablecoin scale.

Open USD may not immediately steal USDC balances, but it will lead investors to assume that Circle may need to give larger splits to retain distribution channels; to enter ecosystems like Stripe, Shopify, Visa, Mastercard, Coinbase, Circle may be unable to maintain its previous reserve‑earnings retention model.

Open Standard officials explicitly state that partners will receive Open USD reserve earnings after a management fee. This essentially tells the market:

The stablecoin profit pool may shift from exclusive issuer ownership to shared distribution network.

5️⃣ Is Circle a "good business"?

Circle has an advantage: its domain is massive. Money transfer, settlement, cross‑border payments, on‑chain finance, AI‑agent payments are huge markets. If stablecoins become new financial infrastructure, the industry is inherently significant.

But it has a flaw: it's not a stable consumer‑to‑consumer (ToC) necessity, but a heavily B‑to‑B, channel‑driven, regulation‑intensive, partner‑competition infrastructure business.

Reuters also noted in this news that stablecoins are still primarily used for crypto token trading and have not yet been widely adopted for everyday payments.

This means Circle hasn't built the stable consumer habits of Coca‑Cola, P&G, or Apple; it relies more on exchanges, wallets, payment firms, banks, merchant platforms, and developers.

Over‑reliance on the B‑side may be its biggest weakness.

Now the issues I see:

1) Technological moat: not deep enough.

Issuing a USD stablecoin has a non‑zero technical barrier, but it's not uncopyable. OUSD can directly use chains like Solana, Base, Stellar, Polygon and existing payment infrastructure. The real challenges are compliance, liquidity, redemption, risk control, distribution, and trust—not the token contract itself.

2) Product and brand moat: exists, but not at consumer‑brand level.

USDC holds a "compliant, transparent, reliable" brand among institutions and developers, one of Circle's biggest assets. Yet at the payment endpoint, many users don't care whether the underlying rail is USDC, OUSD, or another USD token; they care about speed, low cost, convertibility, and safety.

Open Standard participant Félix also said customers don't care which rail the money moves through, but whether their families receive local currency quickly, reliably, and at fair cost.

3) Capital and regulatory moat: present, but being replicated.

Circle's reserve management system, BlackRock, BNY, regulatory compliance, and transparency are advantages. However, Open USD's partners also include BlackRock, BNY, Standard Chartered, Visa, Mastercard, Stripe, etc. When these heavyweight institutions unite, Circle's "more institutional, more compliant" edge remains but is no longer the sole option.

Thus my personal conclusion is:

Circle is a strong early mover in a good sector, but because fundamentals have changed, it is not yet proven to deliver long‑term high ROIC, strong pricing power, and weak competitive erosion; I may not take a heavy short‑term position.

6️⃣ Outlook:

After Open USD launches within the year, its reserves, compliance, chain support, developer experience, secondary market liquidity, and actual merchant usage will take time. Many partners are merely "supporting/exploring" and may not immediately shift core fund flows. Circle maintains USDC above $70 billion, RLDC margin stable, and platform revenues (Arc/CPN/USYC) growing; the market may view today’s drop as sentiment‑driven.

I think for a long period, USDT will continue to dominate offshore and trading scenes, while USDC will remain dominant in compliant DeFi, institutions, US crypto ecosystem, and certain enterprise scenarios,

Then OUSD may penetrate Stripe, merchant settlement, cross‑border payments, and platform economies. Circle can still grow, but valuation multiples may decline as it ceases to be the "sole compliant entry" and becomes one of multiple infrastructure providers.

If you still hold this asset, I think you should watch:

1) USDC circulation and market share: if USDC only sees a stock price drop without on‑chain scale decline, it's sentiment; if supply and share continuously outflow, it's a fundamental shift.

2) RLDC margin: Circle's 2025 RLDC margin is 39%. If this ratio falls markedly to retain channels, it indicates the moat is being eroded by channels.

3) Coinbase's actual moves: Coinbase is both Circle's core partner and present in the Open USD ecosystem. Circle's 10‑K shows Coinbase supports USDC usage, and Circle pays Coinbase a share tied to USDC net reserve income.

If Coinbase's support for OUSD shifts from "an additional option" to "the default choice," that would be detrimental to Circle.

4) Whether Stripe's default stablecoin actually brings balances:
Open Standard cites Stripe stating Open USD will become the default stablecoin for Stripe's business users. However, investors should look at actual balances, settlement volume, and merchant usage, not just announcements.

5) Whether Circle's non‑reserve income can ramp up:
In 2025, 96% of Circle's revenue came from reserve income; if Arc, CPN, wallets, developer tools, USYC, and payment services don't become sizable revenue streams, Circle remains highly dependent on rates and USDC circulation.

6) OUSD reserve transparency and regulatory structure:
If OUSD's reserves, audits, redemption, and regulatory oversight are sufficiently clear, it poses a greater threat to Circle; if these issues are vague, USDC's trust moat will continue to play its role.

7️⃣ Conclusion:

My assessment: CRCL's drop today has a sentiment component, but fundamentals have indeed changed. If you hold it, even a small portion like me, you should analyze and think carefully to decide your next move.

Respect your wealth, and wealth will respect you!

Overall, in the short term, OUSD hasn't launched yet, and Circle's USDC size, transaction volume, reserve system, and enterprise products haven't deteriorated immediately. So amid an over‑reaction, don't panic; best to observe first,

Long term, OUSD's emergence precisely targets Circle's profit pool and moat: it makes the market realize that stablecoin issuers may struggle to monopolize reserve earnings, and payment companies, exchanges, banks, and merchant platforms that control distribution and use cases will demand a larger share of economic benefits.

Thus, while Circle's moat remains, it shifts from a high‑profit platform to one that must prove it is not a replaceable financial conduit.

This is a challenge; if Circle can elevate USDC's trust and liquidity into an integrated platform encompassing Arc, CPN, enterprise payments, APIs, and compliance networks, it still has a chance to be a long‑term winner.

Conversely, if it continues to rely mainly on issuing USDC for reserve earnings, alliances like Open USD will continuously compress its valuation and margins, and other stablecoins may emerge to capture market share.