This group of insiders who know the company best, what kind of foresight or concerns led them to choose an "imperfect" perfect exit?

Author: Ji Zhenyu, Tencent News "Periscope"

In the latest wealth creation story on Wall Street, the listing of stablecoin issuer Circle (NYSE: CRCL) is a simultaneous performance of a "victorious escape" and a "capital rhapsody."

On one side of the story, the company's founders, executives, and early investors collectively cashed out nearly $600 million during the IPO, but thus missed out on the subsequent surge in stock price that brought over $4.2 billion in "paper wealth."

On the other side, Wall Street's unprecedented enthusiasm for this "disruptor of the crypto world" is evident. Its stock price soared from an issuance price of $31 to nearly $300, increasing nearly tenfold in less than a month, making it one of the most eye-catching IPOs of the year. Meanwhile, numerous analysts unhesitatingly gave it a "buy" rating, predicting it would dominate a future market worth trillions of dollars.

This stark contrast raises deep questions for investors: what kind of foresight or concerns led these insiders, who know the company best, to choose an "imperfect" perfect exit? And what vast opportunities do the enthusiastic public market investors see in the company's future?

An analyst focused on the fintech sector told Tencent News that although insiders and early investors sold off heavily during the IPO, he believes this is a routine operation and remains optimistic about the long-term development of stablecoins. He argues that both the regulatory environment and industry ecology indicate that the development of stablecoins is just beginning.

From Vision to Cornerstone: Circle's Decade of Evolution

To understand Circle's internal decisions, one must first grasp the company's DNA. Founded in 2013, founders Jeremy Allaire and Sean Neville aimed for more than just creating a new digital currency. Their vision is recorded in the "Founders' Letter" of the prospectus: "to build a new global economic system," a system based on the internet that allows value to flow freely and frictionlessly like information.

The company's development has not been smooth sailing. Initially, it attempted a peer-to-peer payment application similar to Venmo called Circle Pay and ventured into cryptocurrency exchange operations, but ultimately underwent strategic contraction and business transformation. The real turning point came in 2018 when Circle partnered with crypto giant Coinbase to co-found the Centre consortium and launched its flagship product—the USDC stablecoin.

The design of USDC precisely addresses the pain points in the crypto world: it provides a regulated, transparent value anchor pegged 1:1 to the US dollar. From the outset, Circle adopted a "regulation-first" strategy, proactively applying for and obtaining the first BitLicense issued by New York State, as well as compliance licenses in several major financial centers worldwide. This commitment to compliance has allowed USDC to stand out in a mixed stablecoin market, earning the trust of institutions and the mainstream financial world. As emphasized in its prospectus, Circle is dedicated to "walking through the front door of regulators and policymakers."

Today, USDC has become the second-largest stablecoin globally, with a circulation exceeding $60 billion, operating natively on 20 blockchains, forming the cornerstone of Circle's vast business empire.

Dissecting Circle's Business Model: More Than Just Stablecoins

Although Circle's USDC stablecoin is the most well-known aspect to the outside world, its business model is far more complex and profound than merely "issuing stablecoins."

In summary, it is a multi-layered, networked financial services platform built around its flagship product, USDC, which can be understood as a "one body, two wings" strategic structure:

One Body (Core Business): Interest income model based on USDC reserves. This is currently the company's primary and most mature profit engine. Circle's prospectus shows that from 2022 to 2024, reserve income accounted for over 95% of the company's total revenue. The operational mechanism is as follows: when institutional clients mint USDC, they must deposit an equivalent amount of US dollars. These dollars form a massive USDC reserve pool, which Circle invests in highly liquid, low-risk assets, primarily the "Circle Reserve Fund" government money market fund managed by asset management giant BlackRock, as well as cash held in globally systemically important banks. Circle earns interest and dividends from these reserve assets, which constitutes the company's core revenue—Reserve Income.

Two Wings (Growth Business): Platform fee model based on transactions and services, and emerging asset management model. These are the two major directions the company is focusing on to diversify its revenue and build a long-term moat.

Platform and Developer Services: Circle aims to become the "Stripe" of the Web3 world by providing powerful APIs and tools for developers to build applications and charging service fees. Its products include: a cross-chain transfer protocol (CCTP) that allows "native" transfers of USDC across different blockchains and charges a fee for each transaction; as well as a series of services such as programmable wallets, gas fee solutions, and smart contract platforms designed to simplify the development process and create revenue opportunities.

Asset Management and Tokenized Funds: This marks Circle's entry into traditional finance, with its core product being the interest-bearing tokenized money market fund USYC. By acquiring Hashnote, Circle aims to provide traders in the digital asset market with a tool that can both earn returns and serve as efficient collateral. As the fund manager, Circle can charge management fees and performance fees, opening up a new source of asset management revenue.

The "Truth" of the IPO: A Feast Designed for "Exit"

However, for a company that appears to have a bright future, the structure of its IPO reveals a strong "exit" signal. According to Circle's S-1/A registration statement submitted to the U.S. Securities and Exchange Commission, of the 32 million shares issued, as many as 19.2 million shares (60%) came from the company's "selling shareholders," rather than the company itself. This means that of the over $1 billion raised in the IPO, nearly $600 million went directly into the pockets of early investors and executives.

This list of selling shareholders is star-studded, including founder Jeremy Allaire (selling 1.58 million shares), co-founder P. Sean Neville (selling 1 million shares), and top Silicon Valley venture capital firms like General Catalyst and Breyer Capital.

At the final actual issuance price of $31, these insiders collectively cashed out $595 million. However, when the stock price soared to nearly $300, they missed out on a one-time potential gain of nearly $5 billion.

Wall Street's Enthusiasm: Why is the Market So Optimistic About Circle?

In stark contrast to the insiders' massive retreat is the extreme optimism of the public market. After Circle's listing, its stock price skyrocketed, and its market capitalization quickly surpassed $50 billion.

This enthusiasm is not unfounded; investors and analysts see Circle's unique value and enormous growth potential:

Analysts at Seaport Research hailed Circle as a "top crypto disruptor," giving it a "buy" rating and a target price of $235. Their logic is simple: regardless of which cryptocurrency or blockchain application wins in the future, a stable and reliable medium of exchange will be needed, and USDC is the "dollar of the digital world." Circle does not sell cryptocurrencies but provides the infrastructure necessary for the crypto world to operate, which is considered a more robust business model.

Some analysts predict that the stablecoin market could grow tenfold in the next five years, from the current approximately $260 billion to over $2 trillion. As one of the most compliant and transparent stablecoins on the market, USDC is expected to dominate this massive incremental market. Analysts believe that Circle is more than just USDC. Through partnerships with payment and tech giants like Visa, Mastercard, Grab, and Mercado Libre, it is building a vast payment network. Meanwhile, its developer-facing tools (such as the cross-chain transfer protocol CCTP and wallet services) are attracting tens of thousands of developers to build applications on its platform, creating a strong network effect that further solidifies its leading position.

Additionally, Circle's meteoric rise has been aided by a regulatory environment that is becoming increasingly favorable. Recently, the U.S. Senate passed the GENIUS Act, aimed at establishing a clear regulatory framework for stablecoins, which the market interprets as a significant boon for compliant participants like Circle. Analysts generally believe that a clear regulatory environment will accelerate the adoption of USDC among mainstream financial institutions and enterprises.

The example of Circle's IPO perfectly illustrates two starkly different perspectives in the capital markets: for the founders, executives, and early VCs, this is a rational harvest after a long entrepreneurial journey. They face known significant risks—industry competition, systemic financial risks, and regulatory uncertainties. In the face of these risks, converting part of the "paper wealth" into tangible bank deposits is a prudent and wise financial decision.

For public market investors, however, they are currently betting on a much grander future. They believe that as the tide of the digital economy surges forward, Circle, with its compliance advantages and technological barriers, will become an indispensable financial infrastructure of this new era, with a value far beyond today.

Is it that the cautious insiders misjudged the fuel for the rocket, or that the enthusiastic external investors overlooked the risks of flight? The answer to this nearly $5 billion question may only be revealed by time.

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