Source: BIT Securities

Since OpenUSD joined the stablecoin war, Circle's market position has continually faced doubts, and its stock price has been under pressure. Previously, on August 3, Morgan Stanley was particularly harsh—cutting the target price from $106 directly to $38 and downgrading the rating from neutral to underweight. Just yesterday, Circle released its latest financial report, which to some extent responded to some of the market's most concerned uncertainties.

However, before breaking down the financial report, we must clarify one question: What exactly is Circle afraid of?

1. Core Challenge: 95% of Revenue Relying on "Others Leaving Money Idle"

Circle's current business model can be summarized in one sentence: the vast majority of revenue comes from interest generated by USDC reserves.

This model has two crucial sensitive factors. One is the short-term interest rate of the dollar—if the Federal Reserve lowers rates, it will directly compress reserve yields; the second is the circulation of USDC—channels such as Coinbase and Binance are taking away an increasing share of the pie. Meanwhile, new businesses like payment, settlement, and network services, which were highly anticipated, have not yet generated enough revenue. The entry of OpenUSD has clearly further increased pressure on the revenue side.

Looking at the financial report with this background, many figures come as no surprise.

2. Financial Report Breakdown: A "Very Average" Report Card

Total revenue in Q2 was $701.3 million, a year-on-year increase of 7%, but only a 1% increase compared to the previous quarter, falling short of the market expectation of $713 million.

Breaking down the structure shows the problems more intuitively. Q2 reserve income was $668 million, accounting for about 95% of total revenue—this ratio was 94% last quarter, increasing instead of decreasing. Other income fell from $42 million to $34 million, with the proportion dropping from about 6% to less than 5%.

The profit side was slightly better: EPS was $0.18, slightly higher than the market expectation of $0.16; RLDC profit margin was 41.2%, maintaining a high level, basically unchanged from the previous quarter.

In summary: the data in this financial report is very average, further highlighting the challenges currently faced by Circle

. The revenue structure has not only not improved but has become more reliant on interest.

3. CEO's Response: Renewed Contract with Coinbase, But Not Addressing the Real Pain Points

During the earnings call, the CEO also released some positive information: Circle's agreement with Coinbase has been renewed under the existing terms, ensuring that USDC continues to occupy a core position in all product systems of Coinbase.

However, this response is obviously somewhat weak—it stabilizes the existing stock but does not touch on the core issues. If Circle wants to break the deadlock, it must shift from "making money by relying on users holding USDC" to "making money by relying on USDC being used." The company has been emphasizing payment networks, enterprise services, Arc, and AI proxy payments, but these businesses have yet to form a sufficient revenue scale.

4. Long-term Perspective: Patience is More Important Than Faith Before a New Narrative Appears

In the short term, regardless of how you analyze it, Circle's stock price lacks upward momentum. But what about the long term?

Currently, Circle's profitability is too singular, and the so-called AI payment cannot form scale temporarily—it is also a direction that requires long-term investment to breakthrough. Although the bank license has been obtained, the actions that can be taken are too limited: at this stage, it is merely self-custody and saving on custody fees. Even if it opens up to help other institutions with custody, it does not fundamentally assist in profitability.

What Circle needs most now is to find a way to charge transaction fees while increasing USDC usage. Before this new narrative truly emerges, the value of long-term investment still needs to be patiently awaited.

5. Final Thoughts

The case of Circle actually serves as a reminder to all investors: stocks with a singular profitability structure, no short-term catalysts, and long-term narratives that have not yet materialized, still abound in the market. The common characteristics of these types of assets are—every interest rate decision, every financial report, and every piece of competitive news could trigger sharp fluctuations in stock prices, and the direction is extremely difficult to predict in advance.

Faced with these types of stocks, retail investors are most likely to make two mistakes: heavily betting on one direction, or holding on stubbornly after being stuck. A more mature approach is to define the risk boundaries before stepping in.

This is exactly the problem that BIT Securities aims to resolve with the launch of options buying and margin trading functions. Options buying is suitable for trading these high-volatility assets: whether betting on a rebound or speculating that stock prices will continue to plunge, it allows participation with a small cost, and the maximum loss is locked in at the moment of ordering—the loss is clear if the bet is wrong; if correct, the gains will be amplified along with the volatility.

There will always be right and wrong judgments, but risk exposure can be designed in advance. Grasp the initiative of how much to lose first, then talk about how much to gain.

Disclaimer: This article is written by an invited analyst from BIT's US stock business. The author's views only represent personal analysis and do not represent the official views, investment advice, or positions of BIT and its affiliates. This article is for market information sharing and educational purposes only and does not constitute any investment advice, research report, or securities trading recommendation. The securities, ETFs, and digital assets mentioned in this article are only for market case analysis and do not represent BIT's recommendation to buy, sell or hold related assets. Investment involves risk, and the market may experience price fluctuations or even capital losses. Investors should make independent judgments based on their own risk tolerance and consult professional financial advisors when necessary.

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