A recent analysis by Alex Xu highlights a notable disconnect between the promising outlook for the stablecoin industry and the specific fundamentals of Circle, stressing that demand, scale, and profitability are not linearly linked. This viewpoint directly challenges a common market misconception: being bullish on stablecoins is not the same as being bullish on Circle, as a significant gap separates the two, driven by competitive dynamics and the company's position within the industry chain.
From a market validation standpoint, stablecoins only hold a differentiated advantage over traditional payment and settlement systems in specific scenarios, leaving their future overall scale uncertain. A closer look at the competitive landscape for USDC reveals that lower compliance barriers have weakened the advantages of being a first mover, making the differentiation of stablecoins within crypto contexts increasingly blurred and leaving them without unique appeal in non-crypto applications. This implies that even with existing market demand, USDC's issuance volume is constrained by intense competition among suppliers.
More critically, a massive issuance volume does not necessarily translate into strong profitability. If a company holds a weaker position in the industry chain, it often needs to rely on high-rate channel revenue sharing or subsidies to gain scale, ultimately falling into a dilemma of 'increasing scale without increasing profit' or even incurring losses. This weakness in the vertical industry chain relationship makes it difficult for Circle Internet Corp. to directly convert its traffic advantages into net profits.
Delving into the payment industry chain, the core capabilities that are genuinely scarce and worth paying for, including compliance and anti-money laundering systems, are firmly held by Stripe and Visa (V.US). In contrast, the stablecoin itself issued by Circle, along with its ARC settlement network, CPN infrastructure, and even the X402 standard, all lack the kind of irreplaceable scarcity that would secure a competitive edge. As long as profit opportunities exist in the market, other stablecoin issuers or strong players across the payment chain's upstream and downstream can build similar settlement networks and financial system interfaces.
The replicability of these infrastructures means that Circle lacks a long-term moat, making its business model more susceptible to pressure from upstream payment giants or emerging downstream competitors, and leaving it unable to establish independent pricing power or a profitable, self-sustaining loop. Despite the absence of long-term structural advantages, Circle still presents a specific investment rationale. During bull market cycles, the overall expansion of the crypto market would directly spur a surge in stablecoin demand, consequently driving revenue growth for Circle. This valuation uplift based on cyclical earnings presents a classic 'Davis Double Play' opportunity.
However, this is merely a short-term speculative logic rather than a foundation for long-term value. Investors should clearly differentiate between industry trends and individual company fundamentals, avoiding the mistake of interpreting a macro-level positive outlook as micro-level certainty of profitability. The rigor of logic far outweighs the bias of any viewpoint; only by clarifying the position within the industry chain and understanding competitive barriers can one make rational decisions.