Summary Circle is the issuer of USDC, which holds a dominant market position in regulated stablecoins. USDC is fully backed by a $65 billion USD reserve - interest on which contributes to most of Circle's current revenue. Rate cuts' impact on interest income will be more than offset by expected reserve growth. Rapid growth in platform fees and other areas is underappreciated. Multiple catalysts upcoming that makes Circle a potential multi-bagger. Circle Internet Group ( CRCL ) is the issuer of USDC - the world's largest regulated stablecoin . Its legitimacy is fully cemented with the recent passing of GENIUS Act in the US. And given the network effects in this business (higher circulation begets more users begets higher circulation), USDC's market position in stablecoins is insurmountable. I've been watching this name since its IPO in June - priced originally at $31/IPO share, it immediately opened more than double at $69 on its debut. Then within weeks, it ramped to nearly 10x IPO price to a peak of $298.99 in the midst of euphoria, before beginning a steady descend towards today's level in the $120s. I believe this is a reasonable entry point to initiate a position. Income from Reserves Income from reserves is Circle's current bread-and-butter, as over 95% of their revenue is interest income on a massive USD reserve. To put it simply, Circle issue USDC in exchange for USD from the buyer, then they manage the resulting USD balance like a money market fund by purchasing mostly short-dated US treasuries and cash. The full notional of USDC in circulation is 100% backed by Circle's USD reserve and regulated by the US government. Per latest information from the company, they currently have over $65 billion US dollars in reserve earning 4.1%, which is approximately $2.7 billion/year - quite a juicy amount, albeit they do not get to keep all of it. Circle have various distribution agreements in place with exchanges such as Coinbase and Binance where the exchanges are entitled to 50% or more of the reserve income corresponding to the amount of USDC being held on their platforms. These agreements certainly seem punishing, but they have finite renewal terms (3 years for Coinbase for example) and I have reasons to believe that these terms will improve for Circle in the future - more on that later. Q2 results (their first since IPO) were muddied by non-cash charges of $591 million related to stock expenses from IPO and mark-to-market on a convertible bond irrelevant to the business's ongoing operation. Taking them out, the company earned $109 million for the quarter, which puts valuation at around 60-70 P/E based on annual run-rate - quite low for a company growing rapidly at the start of an S curve, especially given its dominant market position. Q2 revenue grew 53% to $658 million, of which $634 million was income from reserves. While this is at risk due to upcoming rate cuts, I expect their impact will be more than offset by rapid reserve growth. The 2-year rate on the US treasury yield curve is a good proxy of how low the market expects the current rate cut cycle to go: US Treasury Yield Curve The market expects interest rate to bottom at 3.61%, which is about 12% below Circle's current reserve return rate of 4.1%. Circle expects USDC to grow at a 40% CAGR, and even that number is sandbagged as the CEO said so himself. Median third-party research expect 60% annual growth in USDC circulation. In other words, the revenue hit from interest rate cut is a non-issue as it will likely be offset by a single quarter's reserve growth. With a 60% expected growth rate on reserve income, we reach a reasonable 17 P/E in mere 3 years even if we assume no operating leverage, and no other revenue streams. But that's not the end of the story. "Other" Growth Vectors While many investors are focused on reserve income, the "Other Revenue" line is where the real story is. This bucket contains fees related to platform usage and transactions, and it grew a whopping 252% year-over-year, albeit from a very small base. Other revenue was $24 million in Q2, a mere 4% of Circle's total revenue, but with this kind of rapid growth, it becomes a material part of the pie within 2-3 years, and then it will eventually dwarf the reserve income line. USDC is quickly gaining momentum in the real economy. They are already accepted as a payment method by Shopify, Chipotle, Whole Foods, Overstock, GameStop and others, with Amazon and Walmart considering adoption. It is also becoming a quick, convenient, and low-cost way for cross-boarder money transfer. At this point in their hypergrowth cycle, it's very difficult to model the growth trajectory precisely, so I won't attempt to do that yet as it's more important for investors to get this directionally correct first. It's better to be approximately correct, than to be precisely wrong. But let's go through a few examples for a high-level comparison: Visa ( V ), Mastercard ( MA ), and American Express ( AXP ) together represent over $1.4 trillion of market cap. If Circle CEO truly executes his vision on becoming the dominant payment provider for a digital world, it would not be inconceivable that Circle becomes a trillion-dollar company. However, in the scenario where they carve out a significant piece of the pie without outright domination, just reaching American Express's market cap (the smallest of the 3) will give the stock an 8x return. This is before we consider Circle's unique position of being both the issuer AND processor of the unit of payment - an advantage that the traditional firms lack. Current momentum notwithstanding, following are additional reasons why USDC has a good shot at becoming a significant player in payments: (1) Speed of transaction - USDC fully settles in seconds on various blockchains like Solana. Credit cards may authorize in seconds, but final settlement between merchants, acquirers, and issuers takes 1-3 days; (2) Cost of transaction - transacting on various chains may cost pennies to sub-penny depending on congestion, while credit card transactions typically cost 1-3% of purchases, and even higher for cash advances; (3) Unbanked access - USDC requires only a wallet, benefiting users without bank accounts or card access in developing regions, or are unable to obtain a credit card; (4) P2P and cross-border transfers - USDC enables seamless and instant wallet-to-wallet payments, ideal for urgent global transfers without intermediaries, unlike traditional intermediaries that may have delays, fees, or restrictions for P2P. There are 2 more growth catalysts in addition to payments. First is ARC , Circle's in-house blockchain. Prior to ARC, all of Circle's on-chain transactions are processed on partner networks such as ETH and Solana. A "gas fee" is paid into those networks for each transaction to compensate for the work performed. With ARC, Circle will have a new revenue stream in the form of USDC-native gas fee which is set to grow as USDC adoption grows. Second is that as USDC gains wide market acceptance especially in the real economy, I expect the distribution agreements with exchanges such as Coinbase and Binance to be re-negotiated a few years from now. At some point in the future, USDC will have enough of consumer's mindshare that users will demand for USDC to be supported, and the exchanges will be price-takers who have no choice but to support it. Takeaway Circle has an unassailable market position as both the issuer and the processor of the only fully regulated USD-backed stablecoin worth speaking of. While they earn the lion's share of income from interest on reserve, any rate cut impact is expected to be quickly offset by rapid growth of the reserve. The interest income alone is enough to justify current valuation. The market is not giving enough credit to multiple other growth catalysts, including payment processing, ARC blockchain gas fees, and potential renegotiation of distribution agreements. These factors combined give investors a good shot at achieving significant excess return with a position in Circle.