Despite 2025 being hailed as the "Year of Stablecoins," with key legislation expected to be smoothly implemented and Circle's IPO recording an astonishing increase of over 500%, a closer examination reveals that Circle's $200 stock price may be built on quicksand. This article focuses on three core challenges, from distribution dilemmas and interest rate risks to intensified competition, shedding light on why the high valuation of $CRCL may be difficult to sustain.

1. Distribution Dilemma: Growth Constraints

For stablecoins to gain popularity, channel distribution is crucial. However, Circle finds itself in an awkward "middle ground"—neither an offshore crypto giant like Tether nor fully integrated into the traditional U.S. financial system.

Market Share Stagnation

As of now, USDC only accounts for 24% of the total circulating supply of stablecoins, with no apparent trend of expanding its share.

(Data Source: DefiLlama)

USDC is Not the "Pricing Unit" of the Crypto Market

Leading exchanges (such as Binance) generally quote and facilitate trades in USDT, which holds a 67% market share due to its first-mover advantage and network effects; USDC only has 27%, making it difficult to challenge its position.

High Dependence on Coinbase

Circle must share 50% of its net interest income with Coinbase in exchange for its distribution network, severely compressing profit margins. If the partnership weakens, Circle will face significant risks.

Difficulty Penetrating Non-U.S. Markets

Boston-based Circle lacks deep connections with the Greater China region and "Global South" markets, while Tether has been deeply entrenched in these areas for years, naturally possessing distribution advantages.

Potential Rivals Eyeing the Market

Social media giants (Meta, X, etc.) and traditional banks are developing their own stablecoin solutions; once implemented, Circle's channel space will be further squeezed.

2. Interest Rate Pressure from Federal Reserve Rate Cuts

Circle's business model is heavily reliant on the interest income generated from USDC reserves.

• Reserve Interest is the "Lifeline"

Circle's 2024 report shows that 99.1% ($1.661 billion) of the company's revenue comes from reserve interest.

• Highly Sensitive to Rate Cuts

The Federal Reserve is widely expected to enter a rate-cutting cycle over the next two years. If short-term yields decline, Circle's net interest margin (NIM) will be compressed, significantly impacting profitability.

• Lack of Diversified Income

Currently, Circle has not established a diversified business line sufficient to hedge against interest rate risks, making it particularly vulnerable in a rate-cutting environment.

3. Overvaluation: Can High Multiples Be Sustained?

Post-IPO, Circle's valuation metrics have reached staggering levels:

Such aggressive multiples indicate that the market has priced in all "high growth" expectations; achieving corresponding growth is extremely challenging against the backdrop of limited distribution, pressured interest margins, and intensified competition.

Data Source: Artemis

Conclusion: Approach High Valuations with Caution

Although Circle's IPO is impressive, the $200 stock price as of June 20, 2025, may have already overdrawn future expectations. The company is deeply mired in distribution dilemmas, overly reliant on Coinbase, and lacking presence in key markets; potential rate cuts from the Federal Reserve could severely impact its main source of income; against this backdrop, the market has assigned an extremely high valuation multiple—further amplifying the risks.

For investors, it is essential to fully assess the aforementioned concerns before engaging with CRCL and to maintain diversified asset allocation and a long-term perspective to cope with the volatility in the crypto and fintech sectors.

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