The Breakdown - What Everyone Missed About Circle's Explosive IPO

Episode Date: June 15, 2025

Circle's IPO wasn't just successful—it was a rocket ship, surging from its initial price of $31 to over $100 per share in just days. But why did analysts and markets underestimate Circle so dramatically? In this episode of The Breakdown, NLW explores the real story behind Circle's IPO frenzy. He examines why markets are betting big on stablecoins as essential financial infrastructure, breaks down the evolving regulatory landscape, and highlights how Circle's meticulous, years-in-the-making strategy positioned them perfectly for this moment. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Sunday, June 15th, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, today we are discussing what everyone got wrong about Circle. Circle has, of course, been an absolute bonanza since it IPO last week. It IPOed at a price of 31, which was already a big

markup of where it was going out, and it's currently sitting now at like $109 a share, even after the whole geopolitical upheaval of Friday's events with Israel and Iran. I've spent a bunch of time thinking about and talking about this recently with people, and I want to share some of that because I think it's instructive of where we are, both in terms of the market and in terms of crypto. But to anchor this, we're going to read an essay by Andy Baer, who leads research and product development of digital asset indices at CoinDesk. His pieces called Circle goes full circle, and he's going to get a little bit into circle-specific model. Andy writes, by sheer luck, I had an opening bell media hit with NYSE TV this last Thursday, the day Circle listed as CRCL. The NYSE

studio is upstairs at gallery level. I'd first visited the NYSC on the same gallery balcony as a boy with my dad. I remember getting the impression that IBM was a huge company that represented the future. Circle staff and guests filed in at 915, a much larger delegation than most bell ringings. Not only was the floor packed, but both galleries were full. As the applause started, precisely at 929 to 930, everything else stopped. This wasn't the usual opening bell tea ceremony, and why SEP President Lynn Martin stood beside an air-punching Circle CEO Jeremy Aller, and the specialists, floor brokers, and other floor inhabitants joined in the cacophony. The energy took over the whole floor in a way that felt exceptional.

I asked cheekily to the NYSE TV folks, which specialist booth would trade circle. No one had any idea what I was talking about. The producer decided to move our hit to the floor with a handheld microphone and change our subject from Bitcoin to stable coins on the fly. That was fine, planning to say about stable coins. Standing within feet of Jeremy Aller on the floor next to the bell balcony, during our five-minute segment, it was pure electricity. It was the feeling when you finish a marathon and a beaming volunteer places a metal around

your neck. accomplishment and validation. This was a moment enabled by a friendlier SEC and coincident with meaningful blockchain legislation. But it didn't have the vibe of master rapture or youthful defy exuberance. It felt mature and financial, adults celebrating. USDC sprang to life in September 2018, just before a local peak in U.S. interest rates. In retrospect, it was a handy time to launch. When carry or yield from backing assets was positive, but yield expectations in crypto, whose practitioners mostly grew up in a zero interest rate world remained low. When COVID hit in 2020, Zerp or zero interest rate policy returned suddenly, threatening the business model but prompting crypto adoption and experimentalism.

When the Fed aggressively raised rates in 2022 to help metabolize $5 trillion in COVID fiscal stimulus, stable coins faced the opposite combination of supportive and threatening forces, higher carry revenues but traumatized markets. Circles failed SPAC attempt spanned this transition. Announced in July 2021 when three-month yields were 0.05%, the Concord Acquisition deal was negotiated in February 2022 as rates began the historic climb, and ultimately terminated in December 2022 right as rates hit 4.42%. The SEC never declared the S4 registration statement effective. The transition timed out waiting for regulatory approval, just as the underlying economics of Circle's business were being boosted by soaring rates. Now, several years into a 4-5% rate

environment, the model has adapted and appears to be working. USTC holders can receive rewards on Coinbase that are similar to risk-free yields. On-chain cash holdings and collateral can be enhanced with tokenized treasuries. The Genius Act on Stablecoins appears in good shape for passage, opening up the market for greater stablecoin adoption and participation. The U.S. government has a new potential multi-trillion dollar customer for U.S. treasuries, providing much needed demand for U.S. debt, which has become a chess piece in global trade. Circle and other stable coin issuers are enjoying a good carry scenario, although near-term profitability has significant interest rate risk, now under the watchful scrutiny of Circle shareholders and analysts.

Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of TradFi and Crypto, and one of the benefits for a lot of us is that Grayscale products are available

right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. So here's what's interesting about this, and thank you to Andy for your piece, especially because I do think that the sentiment and the experience emotionally of being around these things is a really good thing to capture. So what's interesting to me about this analysis, is that it's actually looking at Circle in specific business terms and understanding how interest rates might impact it. But as it turns out, that was exactly the wrong way to think about Circle.

In the weeks and months leading up to the Circle IPO, there was a lot of question about whether it was even going to go off. When their financials came out, all of the conversation was about how it didn't look all that good. People couldn't help but compare them to tether. They looked at how Coinbase was making so much in their deal. It looked like another example of why distribution was King, and some people didn't think that the IPO was even going to go off. Indeed, then we had rumors of a potential acquisition by Coinbase and Ripple at what we heard at the time would have been a $4 to $5 billion valuation. Now, outside of Circle itself, we also had questions of the appetite for IPOs in general. And where things started to shift for Circle was

when Itoro went public, seemingly suggesting that there was appetite for IPOs in general and crypto specifically. The other force moving back and forth rapidly for Circle between headwind and tailwind was, of course, progress on legislation. It seemed like it would be a slam dunk in the one thing that everyone could get together around. But then the Trump family's crypto behavior started to get in the way of that, and it looked like it wasn't going to happen for a little while. Plus, the bank lobby threw in their hat and started to really push for things that could have threatened Circle. And, of course, looming around Circle always was the fact that once legislation did get through, very near monopoly on regulatory-approved U.S. stable coins would be over. You had to assume that all the

big banks were going to get involved and where was Circle going to be then. These were all the analyses that people were looking at coming into the Circle IPO. And then it just absolutely blew everyone out of the water beating all expectations. So what is the reason why? Some of it is, of course, the IPO window being open and just general enthusiasm, but I don't think that's actually it. Some of it might be the fact that Stablecoin legislation seems to be back on track, but I don't think that's it either. Certainly nothing's changed fundamentally about Circle's business, so it can't be that. So what is it? What did markets miss? What analysts missed, heading into this IPO is the extreme appetite that markets have right now for the category that is

stable coins. It is pretty clear at this point that markets are making a big bet that stable coins are key financial infrastructure for the future. I believe that this is not just based on the way that the administration is talking about them, which is very much positioning them as the next generation of dollars, but also about their own decisions that they've made. And it makes sense. The stable coins are the world's most in-demand financial asset, which is the dollar, wrapped in the best technology package it's ever had. It is a 10x improvement over the way that you interact with dollars now, with the exception of the things that cash will always be better than any digital version of. Still, for most uses that exist in finance and major business, stable coins

are just a phase shift improvement over the existing systems. And it turns out markets want exposure to that. They want exposure at a much higher price that investment bankers thought, and they don't, it doesn't appear to me, care much about Circle's business in the short term. That's not to say that that will always be the case, but it's very clear that Circle has positioned itself to be for the time the one available bet when it comes to stable coin infrastructure. And lest you think that they were just in the right time and the right place, as someone who has watched and interacted with and hosted webinars for, Jeremy and the team at Circle for many, many years, this is the culmination of an extremely long period of very diligent planning. You got to remember, Circle started a very long time ago before we were talking about stable coins. They built wallets. They were interacting with Bitcoin from a payments perspective. When Germilare pivoted circle into the stablecoin space, they were barely a glint in the bucket.

From the beginning, though, it was very clear that the play for that team was to do things by the book and position themselves to be the default U.S. digital dollar. They had studied the history of U.S. financial innovation, which is always an interaction between the public sector and private markets, and they wanted to be the private sector infrastructure that was going to be absorbed into the big public process. That is exactly the playbook that they have run and executed so well. Now, it's not been without struggle. One of the great ironies of them playing by the rules was that because they had exposure to

U.S. banks, as we started to have crises at places like Silicon Valley Bank, they actually ended up having a bigger depegging and risk event than unregulated outside of the U.S. Tether ever had. Still, they weathered that, they positioned themselves for this moment, and they're reaping the rewards now. The reason that you see Circle trading the way that it is has nothing to do with right now. now and it has nothing to do with next quarter. It's a longitudinal, long-term, long bet on stable coins being critical infrastructure for the future of the U.S. financial system. That's what we all

missed, or at least didn't talk enough about when it came to this specific IPO. In any case, it's nothing but good for us, nothing but good for this industry. So once again, congrats to Circle and the whole team there. For now, though, that's going to do it for this breakdown. Appreciate you guys listening, as always, and until next time, be safe and take care of each other. Peace.