Circle, America’s stablecoin golden child, did everything right.

First BitLicense, 2015. Monthly Deloitte attestations, on time, every month. First major issuer licensed under Europe's MiCA. Lobbied for the GENIUS Act and won it. Took a national trust bank charter from the OCC on July 10th.

Straight A's. Perfect attendance. Hall monitor sash.

And yet… the stock is down 79% from its peak.

Now meet the kid smoking behind the gym. Tether, the global king of stablecoins, is offshore. Grey market. No US listing. It publishes when it feels like it. Europe delisted it and it kept growing.

Tether is $184 billion to Circle's $77 billion. It runs on roughly 150 people and cleared over $10 billion in profit last year—about $66 million a head, likely the highest figure any company has ever posted. Apple gets $600,000.

The delinquent never studied. He's valet-parking a Ferrari.

Flogging the Pet

Three reasons the Circle stock is getting pummeled.

The partner. Circle signed the Coinbase agreement in August 2023 from weakness, because it needed distribution. Coinbase keeps 100% of the interest on USDC held on its platform and half the interest everywhere else on Earth. In 2024 that check was $907.9 million—54% of revenue. Last quarter, $407 million of $694 million.

Do the math on what's left. Operating expenses eat another $242 million, because 1,100 employees and a decade of licenses and attestations don't come free. Net income: $55 million. Circle keeps eight cents of every dollar it earns. Time will tell if that number grows or shrinks. 

The consortium. June 30th, 140 companies announced OpenUSD—Visa, Mastercard, Stripe, BlackRock. Design weapon: give the interest away. One founding member is Coinbase. Circle's own landlord helped build the rival. The stock fell 17.5% that day.

The banks. GENIUS bans stablecoin issuers from paying interest. The banks wrote that part. Then regulators let those same banks launch deposit tokens—legally deposits, so they can pay interest. JPMorgan's math: every dollar that becomes a stablecoin costs it four dollars of deposit value. Circle spent a decade lobbying for the law that handcuffed it and armed JPMorgan.

A+ in every subject, and the whole faculty is taking turns flogging it.

Why I Still Want It

The pet isn't stupid. 

He's playing a longer game than anyone else in the room.

Compliance is a cost in a permissionless market and an asset in a permissioned one. The market becomes permissioned when GENIUS forces US exchanges to drop non-compliant coins.

Which is why Tether launched USAT in January. Anchorage issuing. Cantor custodying. Bo Hines, formerly of the White House crypto council, running it. Tether built a compliant shell because it can't bring USDT onshore. It shrugged off Europe. It won’t shrug off America.

The pet was right early. The market always reads early as wrong.

As for the consortium that sent the stock reeling: a consortium is 140 companies each hoping the other 139 do the work, governed by a committee where half the members are competitors who'd rather it fail.

Paxos already ran this experiment. USDG—identical model, 130-plus partners, better payout, Mastercard and Kraken and Robinhood on the roster. USDG's market cap is $322 million. USDC's is $77 billion.

Zelle is the counterexample, and it proves the rule: seven owners, aligned, distribution already sitting inside apps people had. Small enough that everyone bled if it failed.

I'm Not Buying… Yet

All that said, I’m not interested in hitting buy yet. Three things resolve this year.

The contract. The Coinbase deal expires in August. The trap: if the two sides can't agree on new terms, it doesn't end—it renews for three more years on identical terms, until 2029. Coinbase doesn't have to win the negotiation. It only has to not lose it. Circle has to talk a partner into voluntarily taking less. 

The move-out. A year ago, 2.2% of all USDC sat on Circle's own rails, the one place Circle keeps every penny with no split. Today it's 17.2%. About $13.7 billion, quietly relocated out from under Coinbase. That's the only real card at the table. I want it above 20% before I call it a trend.

Rates. If rates fall this year that’s one more lash. Reserve income drops, and float has to grow fast enough to cover it.

Three potential floggings. I’m holding out for one to land badly before I press BUY. 

So I wait. Which is the honor student's whole life. Doing the reading. Showing up early. Watching the delinquent cut class and buy a Ferrari.

But the degree comes for the teacher’s pet. It always does.

He just doesn't get to enjoy high school.