Author: kokii.eth Source: X, @kokii_eth

- Total revenue in 2024 ~$1.7B (+16% YoY), and revenue is highly dependent on "USDC size × interest rate". The bull market has caused the rebound in USDC size, but the market share of USDT competition has not rebounded much; interest rate sensitivity is strong, and the previous interest rate hike cycle was profitable, but now entering the interest rate cut cycle will compress income

- The distribution cost is extremely high ~$10B (+14% YoY), and the vast majority contributed to Coinbase ($910M). According to the annual report of Coinbase 10-K, $224M is rewarded to users (holding USDC can get 4.5% of the income), and the remaining $686 M is eaten by myself

- The cost of compliance is to raise employees well, spending more than $260M of salary every year + $140M administrative expenses, take a closer look at the salary of the legal supervisor is several times that of the product supervisor

- Net profit $157M (-42% YoY), operating profit margin 10%

interest spread is not a good business. If there is only such revenue under high interest rates in the bull market, as the United States relaxes compliance and stablecoin control competition intensifies + bear market + interest rate cuts, the impact of revenue + monopoly decline is devastating. No wonder the expected valuation $4B-$5B (30x PE) is halved than the previous round of valuation $9B

It is a trend to share interest with users. Channels are king, and you need to share your income with B2B partners. In addition to Coinbase, there are Nubank and Binance. These institutions will return it to users through various channels, such as the USDC recommended by Binance to earn more money by free orders to acquire customers. Moreover, with the relaxation of compliance, more RWA/interest-yielding stablecoins have also emerged to squeeze profits.

The stablecoin battle has entered the second chapter. The importance of the central bank comes from the network effect, not the income from printing money. How did Circle prepare to fight this tough battle? IPOs can win a window period of about 12 months for themselves, during which time:

The only pure stablecoin exposure in the secondary market

The interest rate cut will not be so drastic, and there is enough profit margin to layout other businesses

The only optional high-credited stablecoin issuer on the market, signing contracts with more first-tier distribution partners such as Visa or giving institutions a white label

Diversity sources of income will be made in other major economies such as Europe and Japan, and finding new growth points in payment, cross-border settlement and other scenarios

The question is the story of how much funds the market will pay for, and how long the window period will be.