🧐What is Circle falling for? Is its moat still there?

First, let’s talk about the results: I believe $CRCL is oversold in the short term; if market sentiment leads to further overselling, I am considering buying a portion.

However, whether it can be held long-term, I currently do not have the confidence I had before and might need to observe more.

Because the fundamentals and moat have clearly undergone tremendous changes, which are the things I will write about below!

I have been studying a question:

What is the true moat of a company?

Today, the stablecoin track Open Standard announced the launch of Open USD, a new stablecoin backed by more than 140 companies, including Visa, Stripe, Mastercard, BlackRock, and Coinbase.

Investors are assessing its potential competitive threat to USDC.

The significant drop resulting from this is definitely a noteworthy topic regarding moats!

1️⃣ What exactly is $CRCL falling for?

The Open Standard officials also stated that the design of Open USD is:

Companies can mint/redeem at zero cost, with no manual scaling limit; partners take the reserve asset income from Open USD, after deducting a small management fee; governance is jointly decided by the independent company Open Standard and partner boards.

The participation list includes many payment, finance, technology, and crypto infrastructure companies such as Visa, Stripe, Mastercard, American Express, BlackRock, BNY, Google, Shopify, Coinbase, Solana, Base, Ripple, etc.; Stripe has also publicly stated that Open USD will become the default stablecoin choice for Stripe business users;

This clearly indicates that Open USD is not competing with USDC based on technical parameters but rather on allocation mechanisms.

Circle's core profit pool comes from reserve asset income; the core slogan of Open USD is to return more of this income to the partners who generate traffic.

In other words, OUSD aims to share the portion of economic benefits it used to consume with Visa, Stripe, Shopify, Coinbase, banks, wallets, trading platforms, and merchant ecosystems, to quickly acquire users.

The technology of stablecoins “dollar 1:1 + on-chain transfers” itself is not the deepest moat; the real moat lies in trust, regulation, liquidity, distribution, integration, use cases, and economic incentives. Now that the wolves are at the door, everyone can see another possibility.

So I think what is representative here is:

A single technology is not a moat; whether it can continuously transform into irreplaceable products and profits for customers is the real moat.

Previously, I discussed this topic multiple times with friends; Buffett rarely invests in tech companies but is more enthusiastic about fast-moving consumer goods because he understands how quickly the moats of tech companies can change.

2️⃣ Have Circle's fundamentals changed?

Actually, they haven't!

USDC has not lost its peg due to today’s news, nor have we seen any sudden issues with Circle’s reserves.

Circle CEO Jeremy Allaire @jerallaire stated on the X platform that USDC is still “the world’s most trusted, widely adopted, and most prepared stablecoin for institutions.”

He stated that Circle will continue to expand its ecosystem among banks, payment companies, capital market companies, and enterprises, while providing more ways for partners to become “economic stakeholders” in USDC network growth.

Additionally, from the financial report, Circle disclosed Q1 2026 that USDC's circulation at the end was $77 billion, a year-on-year increase of 28%; Q1 USDC on-chain transaction volume was $21.5 trillion, a year-on-year increase of 263%; Q1 total revenue and reserve income were $694 million, a year-on-year increase of 20%; adjusted EBITDA was $151 million, a year-on-year increase of 24%.

DeFiLlama currently shows USDC market capitalization at approximately $73.88 billion, still the second-largest stablecoin;

But where has there been a change? Why has it fallen so much?

Because expectations for the fundamentals have clearly changed.

Stock pricing does not only look at today’s financial report but also considers future cash flows, growth rates, profit margins, and the longevity of the moat.

Circle states that 96% of its revenue in 2025 will come from reserve income; it also mentions in its 10-K that reserve income is primarily determined by stablecoin circulation and reserve yield.

This means that anything affecting USDC's circulation, reserve income sharing ratio, or partners' negotiating power will impact CRCL's long-term value.

3️⃣ Is the moat still there? Yes, but it has been repriced.

I have heard many analyses about Circle's moat; I have continued to learn because I am optimistic about this stock, and I believe its moat has at least four layers:

The first layer is trust and regulatory branding.

A large portion of Circle's USDC reserves are held in the Circle Reserve Fund, managed by BlackRock, with assets custodied at BNY; Circle has also disclosed that it will provide transparency reports on reserve assets. This is crucial for institutional clients, especially as the regulatory framework in the U.S. becomes clearer.

The second layer is existing liquidity and network effects.

USDC has already achieved circulation on the scale of tens of billions, with numerous trading pairs, DeFi integrations, on-chain wallets, enterprise interfaces, and developer habits. Stablecoins are not something that can be completely replaced by just downloading an app; many scenarios depend on liquidity depth, trading pairs, risk control processes, accounting processes, compliance processes, and upstream and downstream interfaces. Circle disclosed that USDC accounted for 63% of stablecoin transaction volume in the season, indicating that USDC remains strong in terms of “usage.”

The third layer is operational and banking infrastructure.

Issuing stablecoins is not a matter of casually releasing tokens; it involves handling minting, redeeming, reserves, auditing, compliance, banking relationships, on-chain security, cross-chain, blacklists, and regulatory demands. Circle partnered with Coinbase in 2018 to promote USDC and updated their collaboration agreement in 2023, granting Circle exclusive governance over the stablecoin network; Coinbase continues to support USDC in terms of deposits, customer products, and so on, while Circle pays Coinbase a share based on USDC net reserve income.

The fourth layer is platformization attempts.

Circle does not just intend to be a USDC issuer; it is also working on infrastructures like Arc, CPN, Circle Wallets, Gateway, Agent Stack, USYC, etc. In Q1 2026, Circle disclosed that CPN’s annualized transaction volume is approximately $8.3 billion and continues to launch products like Managed Payments. If these products can ultimately become irreplaceable “financial operating systems” for enterprises and developers, Circle’s moat will strengthen.

However, the issue is clear: most of these moats are based on strong user inertia, not strong pricing power.

How to understand this statement is crucial!

This means stablecoin users ultimately want something cheap, reliable, convertible, compliant, and integrable.

Merchants may not be loyal to USDC, payment platforms may not be loyal to USDC, and exchanges can accommodate multiple currencies.

The Open Standard approach is precisely to bring all distribution ends into the fold, letting them change from “helping Circle distribute USDC and taking a portion of the cut” to “jointly owning a stablecoin network and sharing reserve income.” This will weaken Circle’s bargaining power over channels.

So Circle’s moat still exists, but it must be downgraded from “wide moat” to “medium moat + high competitive pressure.”

It is not a brand that consumers naturally choose daily like Coca-Cola, nor is it an ecosystem lock-in like Apple’s hardware and software. It is more like an early financial infrastructure platform: having advantages in first-mover, trust, scale, and compliance, but once large distribution channels unite, profit pools will be redistributed.

4️⃣ Why has the market reacted so strongly?

Because this news directly attacks CRCL's three most sensitive variables: USDC circulation, net sharing rate, and ultimate profit margin.

Circle’s business formula can be simplified to:

Profit Potential ≈ USDC Circulation × Reserve Yield × Circle Retention Ratio − Operational Investment

Circle itself disclosed that a 100 basis point drop in interest rates, under the assumed scale by the end of 2025, could reduce reserve income by about $756 million while also reducing distribution and transaction costs by around $369 million;

This indicates a potential multi-hundred-million dollar effect on net economic benefits. This demonstrates that CRCL is highly sensitive to interest rates and stablecoin scales.

Open USD may not immediately seize USDC balances, but it will lead investors to start assuming that in the future, Circle might need to offer more revenue sharing to maintain distribution channels; to enter the ecosystems of Stripe, Shopify, Visa, Mastercard, and Coinbase, Circle might not be able to maintain the previous reserve income retention model.

The Open Standard officials explicitly state that partners will receive Open USD reserve income after deducting management fees. This essentially informs the market:

The profit pool of stablecoins may shift from being solely enjoyed by issuers to being shared by the distribution network.

5️⃣ Is Circle a “good company?”

Circle has one advantage: the direction it is headed is massive. The transfer of money, settlement, cross-border payments, on-chain finance, AI agent payments are all large markets. If stablecoins can truly become new financial infrastructure, this industry itself is significant enough.

But it also has a hard injury: it is not a stable essential consumer good for ToC, but rather a strong ToB, with strong channel, regulatory, and cooperative partner dynamics in its infrastructure business.

Reuters also mentioned in this news that stablecoins are still primarily used for trading crypto tokens and are not yet widely used for daily payments and receipts.

This means Circle has not yet formed a stable consumer habit like Coca-Cola, Procter & Gamble, or Apple; it relies heavily on exchanges, wallets, payment companies, banks, merchant platforms, and developers.

Being overly reliant on B-end may be the biggest shortcoming.

Now let’s address the issues I see:

1) Technical moat: not deep enough.

Issuing a dollar stablecoin does not have a zero technical threshold, but it's also not unreplicable. OUSD can directly utilize existing chains and payment infrastructures like Solana, Base, Stellar, Polygon, etc. The real difficulty lies in compliance, liquidity, redemption, risk control, distribution, and trust, not in the "token contract itself."

2) Product and brand moat: exists, but not at the consumer brand level.

USDC holds a brand of “compliance, transparency, and reliability” in the minds of institutions and developers, which is one of Circle’s greatest assets. However, at payment terminals, many users do not actually care whether the underlying rail is USDC, OUSD, or another dollar token; they only care about the speed of deposits, low costs, the ability to convert, and that it won’t have issues.

An Open Standard participant, Félix, also stated that customers do not care which rail the money moves through, but whether their family can receive local currency quickly, reliably, and at fair costs.

3) Capital and regulatory moat: exists, but is being replicated.

Circle’s reserve management system, BlackRock, BNY, regulatory compliance, and transparency are advantages. However, Open USD's partners also include heavyweight institutions like BlackRock, BNY, Standard Chartered, Visa, Mastercard, and Stripe. When these players join together, Circle’s advantage of being "more institutional and compliant" persists, but it is no longer the only choice.

So my personal conclusion is:

Circle is a strong first mover in a good track, but due to the changes in fundamentals, it is currently not a business that has proven it can achieve long-term high ROIC, strong pricing power, or withstand competitive erosion, so I may not choose to heavily invest in the short term.

6️⃣ Future developments:

After Open USD launches within the year, reserves, compliance, chain support, development experience, secondary market liquidity, and actual use by merchants will all require time. Many partners are merely "supporting/exploring" and may not immediately migrate core cash flows. If Circle maintains USDC scale above $70 billion, RLDC margin stable, and platforms like Arc/CPN/USYC see revenue growth, the market will find today’s decline to be somewhat emotional.

I think for a long time, USDT should continue to dominate offshore and trading scenes, while USDC continues to rule compliant DeFi, institutions, and parts of the U.S. crypto ecosystem,

and then OUSD may penetrate Stripe, merchant settlements, cross-border payments, and platform economies. Circle can still grow, but its valuation multiples will decline because it is no longer the "only compliant entry," but one of several infrastructure providers.

If you still hold this asset, I think you should observe the following:

1) USDC circulation and market share: If USDC only sees its stock price drop but on-chain scale remains stable, that's emotion; if USDC supply and share continue to flow out, that's a fundamental change.

2) RLDC margin: Circle’s RLDC margin in 2025 is 39%. If this ratio significantly declines in order to retain channels in the future, it indicates the moat is being taken by the channel.

3) Actual actions from Coinbase: Coinbase is both Circle's core partner and appears in the Open USD ecosystem. Circle’s 10-K shows that Coinbase supports USDC usage, and Circle pays Coinbase a share related to USDC net reserve income.

If Coinbase’s support for OUSD shifts from “an additional option” to “highlighting a default option,” it would be detrimental to Circle.

4) Whether Stripe’s default stablecoin really brings balances:

Open Standard officials quoted Stripe's statement that Open USD will become the default stablecoin for Stripe business users. But investments should focus on actual balances, real settlement volumes, and genuine merchant usage, not announcements.

5) Whether Circle’s non-reserve income can rise:

In 2025, 96% of Circle’s income comes from reserve income; if Arc, CPN, wallets, developer tools, USYC, and payment services cannot generate considerable income, Circle will still be highly dependent on interest rates and USDC circulation.

6) OUSD reserve transparency and regulatory structure:

If OUSD's reserves, audits, redemptions, and regulatory subjects are sufficiently clear, it poses a greater threat to Circle; if these issues are ambiguous, USDC's trust moat will continue to function.

7️⃣ Conclusion:

My judgment is that CRCL's drop today has an emotional component, but there has indeed been a fundamental change. If you hold it, even if just a small part of this asset like I do, you should analyze and reflect on it carefully, deciding on the next actions.

Respect your wealth, and wealth will respect you!

In summary, in the short term, since OUSD has not yet launched, Circle's USDC scale, transaction volume, reserve system, and enterprise products have not immediately deteriorated, so in the case of excessive reaction, don't panic for now; it’s best to wait and see,

In the long run, the emergence of OUSD does indeed strike at Circle’s profit pool and moat precisely: it makes the market aware that stablecoin issuers may find it difficult to monopolize reserve income in the long term, as those who truly master the distribution and usage scenarios—payment companies, exchanges, banks, and merchant platforms—will demand a larger share of economic benefits.

Thus, while Circle's moat still exists, it has shifted from being a high-profit platform to one that must prove it is not just an alternative financial pipeline.

This is a dilemma; if Circle can upgrade USDC's trust and liquidity into a comprehensive platform of Arc/CPN/enterprise payments/API/compliance networks, it still has a chance to be a long-term winner.