Author: @lufeieth

Foreword

This is merely a thought experiment, for reference only. Discussion and exchange of ideas are welcome. This is not investment advice; you are solely responsible for your own profits and losses.

Valuing Circle (CRCL) is not easy, especially using a discounted cash flow (DCF) model. Even slight changes to key parameters can lead to significant discrepancies. Therefore, we can only attempt to find some approximate correctness using a relatively conservative approach.

Sending the following prompt to ChatGPT and Gemini yielded the same number.

Prompt:

Based on: Circle's EBITDA ≈ USDC issuance size, USD benchmark interest rate 38%, gross margin - annual fixed operating costs .

Specific figures:

As of December 31, 2025, the issuance of USDC will be calculated at 70 billion.

If we assume that the issuance of USDC will grow at an average annual rate of 15% over the 10 years starting from January 2026 (2026-2035), then the issuance of USDC will continue to grow.

Interest and EBITDA are calculated using the average issuance of USDC in a given year (rather than the issuance at the end of the year).

The annual benchmark interest rate for the US dollar is calculated at 2.5%.

Annual fixed operating costs are $500 million in 2025, with an estimated 10% increase per year starting in 2026.

The effective tax rate is calculated at 24%.

PE is calculated at 20.

The fully diluted share capital is calculated as 275 million shares.

The discount rate is calculated at 10%.

Calculate CRCL's free cash flow, enterprise value, and the fair share price discounted to January 2026.

I. Parameter Description of the Valuation Model

1. Gross Profit Margin:

Circle's gross margin in the Q3 2025 financial report was 39.5%, but we take 38% for calculation.

Circle named its key performance indicator RLDC in its performance materials. RLDC is defined as Total Revenue and Reserve Income minus Total Distribution, Transaction and Other Costs.

The RLDC Margin is defined as RLDC divided by Total Revenue and Reserve Income.

2. Benchmark interest rate:

The current federal funds rate is projected to be 3.5-3.75% in February 2026, but its specific direction each year is unknown. We will take an average of 2.5% over the next 10 years.

3. Fixed operating costs:

The company's fixed cost guidance for 2025 is $495 million to $510 million. We take $500 million, representing an annual growth of 10%. (For reference: VISA and MA's fixed cost growth rate for 2025 is around 10%).

4. PE

multiple:

For CRCL, we use its 10-year average PE ratio of 20. (For reference, the average 10-year PE ratios for Visa and MA are 27-35.)

5. USDC issuance:

On December 31, 2025, the issuance of USDC will be 75.3 billion, but on February 1, 2026, it will be 70.2 billion. We will use 70 billion as the base for our calculation.

6. Average annual growth rate of USDC issuance:

This is the biggest variable . Let's calculate based on 15% for now. Later, there's a table showing different valuations corresponding to growth rates ranging from 10% to 40%.

7. Effective tax rate:

"Income tax expense or benefit" divided by "pre-tax profit" reflects the company's overall tax burden under the current profit structure. Circle's Q2 and Q3 2025 financial statements are negative due to tax deductions and exemptions, and therefore cannot be used as a reference. We will tentatively use 24%.

8. Fully diluted share capital:

Basic share capital: refers to "the number of issued and outstanding ordinary shares", which is the total number of shares actually held by shareholders at a certain disclosure point in time.

As of November 6, 2025, Circle had 216,487,160 Class A shares and 18,988,431 Class B shares outstanding, totaling 235,475,591 shares.

Fully diluted share capital: This is the basic share capital plus any existing potential dilutive items. It is commonly used in per-share valuation and includes existing potential dilutive instruments. These include:

① The number of shares available for issuance corresponding to the granted portion of the equity incentive plan is 35,413,000 shares.

② 1,744,000 shares may be issued in connection with mergers and acquisitions or subject to conditions such as service periods.

③ The convertible notes may be converted into 1,125,000 shares.

④ The potential number of shares related to the warrants is 1,248,000.

The total is approximately 275,005,591 shares, or about 275 million shares.

There is also a maximum fully diluted share capital (based on a stress test approach, including any future ungranted incentive pool):

In addition to the 275 million shares mentioned above, 31,348,000 shares will be added to the "future equity incentive pool." This brings the total to approximately 306,353,591 shares, or about 306 million shares.

Our model uses a fully diluted share capital of 275 million as the benchmark.

The following are the calculation results in sections two, three, and four:

II. Units and Scope

1. Unit Description

(1) All amounts in the table below are in US$ billion.

(2) The issuance size of USDC is expressed as “average balance of the year”, in US$ billion.

(3) The stock price is in US dollars per share.

2. Calculate the chain

(1) Annual benchmark interest income = Annual average USDC balance × 2.5%

(2) Gross profit retention = Interest base income × 38%

(3) EBITDA ≈ Gross Retained Profit − Fixed Operating Costs for the Year

(4) Taxes and fees = max(EBITDA, 0) × 24%

(5) FCF ≈ EBITDA - Taxes

(6) Discount rate of 10%, discounting the cash flows at the end of each year back to January 2026.

(7) 2035 year-end future value = 2035 FCF × PE 20 times

(8) Fully diluted share capital = 275 million shares

III. Annual Free Cash Flow (USD Billion) from 2026 to 2035

The total present value of the dominant FCF (from 2026 to 2035) is approximately US$2.282 billion.

IV. Enterprise Value and Fair Share Price in January 2026 (Based on Fully Diluted 275 Million Shares)

1. Final value at the end of 2035

(1) FCF in 2035 = US$926 million

(2) Final value = 9.26 × 20 = US$185.13 billion

(3) Future value present value = 185.13 ÷ 1.1^10 = 71.38 billion US dollars

2. Enterprise Value (EV) (discounted to January 2026)

(1) EV = Present value of explicit future 22.82 + Present value of future 71.38 = US$94.20 billion

3. Fair share price discounted to January 2026

(1) Value per share = US$9.42 billion ÷ 275 million shares = US$34.25 per share

4. One verification point

(1) The present value of the terminal value accounts for about 75.8% , which means that the valuation is highly sensitive to the 38% retention rate, fixed cost path and terminal value multiple.

V. Summary of results under different average annual growth rates of USDC (2026–2035 explicit period, 2035 future value is given at PE=20, 10% discount)

illustrate:

(1) Calculate the enterprise value (EV) and fair stock price discounted to January 2026 under different scenarios with an average annual growth rate of USDC of 10%–40% (incrementing by 1%).

(2) The EV in the table below is the enterprise value discounted to January 2026. The share price = EV ÷ 275 million shares (fully diluted share capital).

(3) Unit: USDC size and EV at the end of 2035 are both billion USD (B USD), and the stock price is USD/share.

The table above highlights 20% in red, which means that, under a conservative estimate, if you believe that USDC's average annual growth rate will be 20% in the future, then CRCL at $62 (the price at 22:00 on February 2, 2026, half an hour before the market opens) may have a slight margin of safety.

Note: Even if there might be a slight margin of safety, it doesn't mean the price won't continue to fall. And I actually hope it will continue to fall. It might even fall significantly. This is because many factors influence short-term stock price fluctuations, such as...

Forced seller (the person forced to sell)

If you used leverage, you could even face a margin call and lose everything. Remember:

"Preserve your principal, don't let it go to zero."

Do not use leverage. Otherwise, the future will be irrelevant to you.

VI. Some Explanations

1. The parameters used in the model are all conservative; the aim is simply to see what a reasonable estimate would be under conservative conditions. You can modify the specific numbers and send them to chatGPT or Gemini for direct calculation.

2. The model only considers USDC reserve interest income and does not consider other income items. In Circle's Q3 2025 financial report, other income items amounted to $29 million. Because the growth rate was difficult to estimate, the model did not include it for the sake of conservative estimation.

3. Circle's Product Vision for 2026

The potential revenue from products under development, such as the Arc Chain, CPN Network, xReserve, and StableFX, mentioned in the article, is not included in the model and can be considered as upside options not factored into the valuation.

4. The biggest variable and core issue affecting model valuation then becomes:

How large do you think stablecoins and USDC will be in the next 5 to 10 years? Can USDC achieve an average annual growth rate of 20%?
Is Circle still the leading compliant stablecoin, and can it maintain its market share in an environment of increasing regulation and competition?

5. Although the market generally believes that trends such as cross-border payments, the "dollarization" of the Third World, tokenized stocks, on-chain government bonds, RWA, prediction markets, and even AI agent payments will benefit stablecoins, for investors who need to invest real money, cognition and logic are only the starting point.

What truly determines position size and the ability to hold on during market volatility are the consistently emerging, traceable, and verifiable facts and evidence. Conclusions must be sought and verified by each individual; only by holding the chain of evidence in one's own hands can one have the strength and resolve to withstand future fluctuations and noise.

VII. Appendix Reference: USDC vs USDT Growth Table over the Past 6 Years (2020–2025)

illustrate

1. Issuance caliber: The circulating supply as of December 31st each year, in US$100 million.

2. Year-on-year growth rate (YoY): Year-end of the current year ÷ Year-end of the previous year − 1

3. Mind Decoding Content: Add the original text based on the image you sent.

4. The "average annualized growth rate" is calculated based on the CAGR (5-year interval) from the end of 2020 to the end of 2025.

This is just for reference, to give you an intuitive sense of the magnitude. It does not mean that the growth rate will be the same in the future.

波场网络Q3总收入创历史新高，达5.77亿美元，环比增长43%

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