Surging 35% in a Day, How Close is Circle to Becoming the "On-Chain Visa"?

On February 25, Circle released a fiscal year 2025 annual report that exceeded expectations, effectively correcting the market's previous pessimism.

The financial report shows that its total revenue and reserve income reached $2.7 billion, a year-on-year surge of 64%. This significant data directly ignited the secondary market: CRCL's stock price soared from $61 to close at $83 in a single day, with an intraday maximum increase of 35%, marking the largest single-day gain since October 2 last year.

Looking back at CRCL's trend, since its IPO last June hit a high of $298, its stock price experienced a long correction, even hitting a historical low of $49.90 on February 5 this year. This robust rebound represents a repricing of Circle's commercial potential by the capital market.

Core Engine: USDC Market Expansion

Amidst a slowdown in the overall stablecoin market growth, Circle's core fundamentals are bucking the trend:

• Surge in Circulation: By the end of 2025, USDC circulation reached $75.3 billion, a year-on-year increase of 72%.

• Market Share Reversal: Market share expanded against the trend by 4.26 percentage points, climbing to 28%.

• Economies of Scale: As volume expands, the marginal cost of issuing each new dollar of USDC is significantly decreasing.

Behind this growth is the concentrated realization of compliance dividends. The compliance controversies long faced by competitor Tether have paved the way for Circle, and its costs incurred over the years in embracing regulation are steadily converting into tangible market share.

Valuation Reshaping: From "Yield Spread Model" to "On-Chain Visa"

Compared to the impressive revenue, the business transformation signals revealed in the financial report offer more room for imagination. Circle is shedding the label of a mere "stablecoin issuer" and evolving into an underlying "payment network operator":

1. Arc Network: The Settlement Hub for Traditional Finance Entry

• Strong Testnet Data: Currently, over 100 institutions have connected, maintaining nearly 100% uptime. The network has achieved rapid transaction finality of 0.5 seconds, with an average daily transaction volume reaching 2.3 million.

• Visa Milestone Partnership: Visa has announced allowing US issuers and acquirers to use USDC for settlement. This means USDC has substantively penetrated the underlying infrastructure of traditional payments.

• Mainnet Launch: The official report clarifies plans to officially launch the Arc mainnet within 2026.

2. Steady Expansion of Circle Payment Network (CPN)

• Currently, 55 financial institutions have registered, with an annualized transaction volume of $5.7 billion. Although the base is small, the valuation ceiling of this new business model is far higher than merely earning interest spreads.

3. Comprehensive Growth of Multi-Asset Matrix

• Stimulated by the implementation of the MiCA regulation, demand for the Euro stablecoin EURC has been significantly activated, with circulation reaching €310 million, a year-on-year surge of 284%.

• The tokenized treasury product USYC reached an asset scale of $1.5 billion, a month-on-month increase of 111%, confirming the strong institutional thirst for on-chain interest-bearing assets.

Concerns Behind Prosperity: The Game Between Margins and Macro Cycles

Despite high-flying indicators, this financial report also exposes the realistic challenges Circle faces.

• Book Loss vs. Actual Profit: For the full year of 2025, Circle recorded a net loss of $69.5 million. However, this is mainly attributed to $424 million in stock-based compensation expenses triggered by the IPO. Excluding this non-cash expense, its full-year adjusted EBITDA actually reached $582 million, a year-on-year jump of 104%.

• Yield Compression from Rate Cut Expectations: The company's reserve yield has slipped from the previous 4.1% to 3.8%, and this trend may continue. According to the latest Polymarket data, the market probability of the Fed not cutting rates in March and April is 97% and 86% respectively, but by June, the probability of a 25 basis point cut rises to 46%. If the Fed restarts rate cuts mid-year, the interest spread income Circle heavily relies on will face significant pressure.

This is also reflected in management's forward guidance for 2026. Officials expect the revenue margin after deducting distribution costs to be between 38% - 40%, basically maintaining the status quo. This indicates that in the current macro environment, the room for Circle's profit margin to continue expanding upward in the short term is relatively limited.

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