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- Circle holds just 73 BTC and 1,746 ETH, drawing criticism for its low exposure to leading cryptocurrencies compared to competitors like Tether.
- The company’s annual compensation costs are $250M, with $140M in operating expenses, raising questions about its $5B valuation.
- Circle’s reliance on Coinbase for USDC revenue has led to speculation that Coinbase or Ripple could acquire the company for $15-20B if its IPO falters.
Circle’s recent initial public offering (IPO) filing has sent shockwaves through the crypto industry, with many insiders questioning the company’s financial stability and investment strategy particularly regarding Bitcoin. While Circle is widely recognized for issuing the USDC stablecoin, its latest financial disclosures have sparked concerns about its long-term viability and direction.
One of the most surprising revelations in Circle’s filing is its relatively small holdings of Bitcoin and Ethereum. As of December 31, 2024, the company held only 73 BTC, valued at approximately $6.78 million, and 1,746 ETH, worth about $5.82 million. These numbers are particularly underwhelming when compared to Tether, which holds an impressive 92,000 BTC—valued at $7.64 billion placing it among the top six Bitcoin holders globally.
Instead of heavily investing in Bitcoin and Ethereum, Circle has directed a significant portion of its assets toward alternative cryptocurrencies. Its altcoin portfolio includes 6.25 million Sei tokens, 2.3 million Sui tokens, 867,000 Optimism tokens, and 217,000 Aptos tokens.
Additionally, other unspecified digital assets contribute an estimated $3.37 million, bringing the total value of Circle’s altcoin holdings to approximately $18.7 million. This allocation significantly outweighs its investments in Bitcoin and Ethereum, raising concerns that the company may not have confidence in the long-term strength of the two leading cryptocurrencies.
Circle’s Low Bitcoin and Ethereum Holdings Criticized
This investment strategy has sparked criticism from prominent figures in the crypto space. Richard Heart, the founder of HEX, commented on the situation, pointing out that Circle’s holdings of Bitcoin and Ethereum are unusually low for a company of its stature. He noted that companies and individuals who hold significant amounts of Bitcoin and Ethereum play a crucial role in supporting the market, implying that Circle’s lack of commitment to these assets could be detrimental.
Beyond its crypto investment choices, Circle’s overall financial stability has come under scrutiny. Omar Kanji, a partner at Dragonfly, has raised questions about how the company justifies a $5 billion valuation, especially in light of its financials. According to Kanji, Circle’s annual compensation expenses have ballooned to $250 million, while its general operating costs stand at $140 million.
He also pointed out that the company’s revenue model heavily depends on interest income, which could decline if interest rates fall, putting further pressure on its bottom line. Given these financial concerns, Kanji suggested that Circle’s IPO might not be a sign of growth but rather a desperate attempt to secure liquidity.
Circle’s Potential $20B Buyout by Coinbase or Ripple
Adding to these concerns, analysts have also pointed out Circle’s heavy reliance on Coinbase for revenue generated from USDC. According to VanEck’s Wyatt Lonergan, Coinbase takes a significant share of Circle’s earnings, reportedly netting nearly $900 million of the $1 billion Circle generates from USDC. This dependence could prove to be a major weakness, as any issues with Coinbase could have a substantial impact on Circle’s financial performance.
With so much uncertainty surrounding Circle’s IPO, speculation has begun about potential buyout scenarios. If the company’s stock struggles after going public, some analysts believe Coinbase could step in and acquire Circle. Others have suggested that Ripple might enter the fray, potentially leading to a bidding war that could value Circle between $15 billion and $20 billion. Such a move would significantly alter the landscape of the stablecoin market and could give Ripple a stronger foothold in cross-border payments.
Circle’s IPO is shaping up to be one of the most highly debated events in the crypto industry. While some see it as an opportunity for growth, others believe the company’s financials paint a different picture one of structural weaknesses and over-reliance on external partners. Whether investors will embrace Circle’s vision or see its IPO as a risky bet remains to be seen. The coming months will be crucial in determining whether Circle can live up to its valuation or if its IPO will expose deeper flaws in its business model.
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