The filing for Circle’s initial public offering (IPO) has sparked significant backlash from professionals within the industry, who express doubts regarding its Bitcoin approach and overall financial soundness.
Although Circle is primarily recognized for creating the USDC stablecoin, recent disclosures in their IPO paperwork have raised eyebrows, leading to skepticism throughout the crypto sector.
Heavy on altcoins, minimal in Bitcoin and Ethereum
A review of Circle’s cryptocurrency acquisitions reveals an unexpectedly low allocation to Bitcoin and Ethereum.
As of December 31, 2024, the firm possessed merely 73 BTC, valued at approximately $6.78 million, and 1,746 ETH, worth around $5.82 million.
These amounts seem particularly modest, especially when stacked against Tether’s holdings of 92,000 BTC, valued at about $7.64 billion, positioning it among the leading Bitcoin holders globally.
Instead, Circle is seemingly concentrating on a range of alternative cryptocurrencies. The firm’s altcoin assets comprise 6.25 million Sei tokens, 2.3 million Sui tokens, and over 867,000 Optimism tokens. Additionally, it holds more than 217,000 Aptos tokens and various other digital assets that altogether contribute $3.37 million to its portfolio.
The total fair value of these assets, amounting to $18.7 million, far surpasses its allocations in Bitcoin and Ethereum.
Critics argue this inclination reflects a lack of faith in the enduring value of Bitcoin and Ethereum. While this might signal a belief in the potential of newer blockchain ecosystems, many view it as a precarious strategy that undermines Circle’s credibility.
Richard Heart, the founder of HEX, commented:
“Circle, known for USDC, reported holding $7M in Bitcoin and $6M in Ethereum as of December 31, 2024. That’s an exceedingly minimal crypto position. Certain companies and individuals performing well contribute more positively to Bitcoin and Ethereum prices than others. We should acknowledge and respect them.”
Circle’s valuation under scrutiny
Beyond its modest Bitcoin and Ethereum holdings, analysts are closely examining Circle’s financial statements.
Omar Kanji, a partner at Dragonfly, criticized the IPO documentation, challenging the justification for the company’s $5 billion valuation. He pointed out various concerns, such as soaring compensation expenses totaling $250 million annually and $140 million in general costs.
Kanji also indicated that Circle’s dependence on interest rates, which appear to have reached their peak, could further strain its primary revenue sources.
He suggested that the IPO might be a desperate attempt for capital, describing Circle’s business model as fundamentally flawed.
Contributing to the unease, Wyatt Lonergan from VanEck observed that Coinbase garners a substantial portion of USDC-related revenues.
He estimated that Coinbase captures nearly $900 million of Circle’s $1 billion earnings from USDC. This dependence on Coinbase could severely impact Circle’s future if the IPO does not meet expectations.
In light of this, Lonergan proposed a scenario in which Coinbase might consider acquiring Circle post-IPO if its shares falter. He also raised the possibility of a bidding competition, with Ripple potentially entering the fray at a valuation between $15 billion and $20 billion.
Mentioned in this article
