Circle is the issuer of USDC, which is the second largest stablecoin in the crypto world, the first being USDT. The total market value of stablecoins is 250 billion USD, with USDC accounting for 24%, approximately 60 billion USD.
Last year's net profit of USDC was 1.6 billion USD, 900 million USD went to Coinbase, and after taxes, there was only 120 million USD left. Circle currently has a market value of 44.4 billion USD.
Valuing based on discounted cash flow is way too high, and it can't be bought at all. Therefore, if we want to buy Circle, we can only view it as a growth stock.
In the stablecoin sector, aside from speculation, its application scope will definitely be very broad in the future. The folks on Wall Street have calculated that by 2028, there will be around 2 trillion USD in stablecoin market value.
If Circle's market share remains unchanged, then it would be approximately 480 billion, which is 8 times the current value. The estimated annual net profit would be around 12.8 billion.
The expected profit for 2028 is 12.8 billion, so is the current 60 billion market value high? The growth rate is 800%. The PEG is 3.18. According to the logic of growth stocks, if PEG is greater than 1, then it is a buy. For example, if growth reaches 480 billion and then stops, with a profit of 12.8 billion, based on the current valuation, the market value is 44.4 billion USD, so the PE is only 3.64 times, which is why Circle is increasing so rapidly.
If the scale of this stablecoin is real, then an 8x increase in three years can be expected, with Circle's valuation around 380 billion. This is driven by performance, and if we add the increase in valuation, then a 10x increase in three years is not impossible. If this can truly be achieved, then buying Circle at a market value below 190 billion USD is reasonable, which is more cost-effective than putting it in the bank. Of course, the premise is that this stablecoin scale can really be realized.
My estimate is very rough. There are many details that remain unknown, and 54% of USDC's profit will be taken by Coinbase. So when the stablecoin bill was passed, Coinbase jumped directly by 16%. It is uncertain how long Coinbase can take this profit and whether it can continue to take it.
Stablecoins are really convenient for payment settlement, with quick arrival and no interception. Transaction fees are low, and they directly connect the crypto world with the real world.
