Is CRCL now expensive? Using the DCF valuation model, I calculated a valuation for Circle's stock price.

Author: @lufeieth

Preface

This is just an experimental thought exercise for reference only. Welcome to exchange ideas and clash of viewpoints. Not investment advice; please bear your own risks and rewards.

Valuing Circle (CRCL) is not easy, especially using a discounted cash flow (DCF) model, where small changes in key parameters can lead to large differences. We can only attempt to find some approximate “correctness” under a relatively conservative approach.

Sending the following prompt to ChatGPT and Gemini yields the same result.

Prompt:

Based on: Circle’s EBITDA ≈ USDC issuance volume in USD × benchmark interest rate 38% gross profit margin - annual fixed operating costs.

Specific numbers:

As of December 31, 2025, USDC issuance is calculated at 70 billion.

Assuming from January 2026 over 10 years (2026-2035), USDC issuance grows at an average of 15% annually.

Use the average USDC issuance (not the year-end amount) for interest calculation and EBITDA estimation.

The annual benchmark interest rate is assumed to be 2.5%.

Annual fixed operating costs are $500 million in 2025, increasing by 10% each year starting from 2026.

Effective tax rate is assumed to be 24%.

PE ratio is assumed to be 20x.

Fully diluted share count is assumed to be 275 million shares.

Discount rate is 10%.

Calculate CRCL’s free cash flow, enterprise value, and a reasonable stock price as of January 2026, discounted back.

I. Parameters used in the valuation model

1. Gross profit margin:

Circle’s Q3 2025 financial report shows a gross margin of 39.5%; we use 38% for calculation.

In performance materials, Circle refers to key operational metrics as RLDC. RLDC is defined as Total Revenue and Reserve Income minus Total Distribution, Transaction, and Other Costs, i.e., total revenue and reserve income minus total distribution costs, transaction costs, and other expenses.

RLDC Margin is RLDC divided by Total Revenue and Reserve Income.

2. Benchmark interest rate:

Currently, the federal benchmark rate in February 2026 is 3.5-3.75%, but future trends are uncertain. We assume an average of 2.5% over the next 10 years.

3. Fixed operating costs:

Circle’s 2025 fixed cost guidance is $495-510 million; we take $500 million, increasing by 10% annually from 2026. (For reference: Visa and Mastercard’s fixed costs grew about 10% in 2025).

4. PE multiple:

We assume an average PE of 20x over 10 years for CRCL. (For reference: Visa and Mastercard’s 10-year average PE is 27-35x).

5. USDC issuance volume:

As of December 31, 2025, USDC issuance was 75.3 billion, but on February 1, 2026, it was 70.2 billion. We take 70 billion as the base.

6. USDC annual growth rate:

This is the most variable factor. We start with 15%. A table with different growth rates from 10% to 40% is provided.

7. Effective tax rate:

“Income tax expense or benefit” divided by “profit before tax” reflects the company’s overall tax burden under current profit structure. Due to tax deductions and exemptions, Circle’s Q2 and Q3 2025 reports show negative values, so we use 24% as a conservative estimate.

8. Fully diluted share count:

Basic shares: “Issued and outstanding common shares” at a certain disclosure point, i.e., the total number of shares actually held by shareholders.

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

Fully diluted shares include:

① Stock options granted: 35,413,000 shares.

② Shares from acquisitions or subject to vesting conditions: 1,744,000 shares.

③ Potential convertible notes: 1,125,000 shares.

④ Warrants: 1,248,000 shares.

Total approximately 275,005,591 shares (~275 million).

There is also a maximum fully diluted share count (more stress-testing oriented, including ungranted incentive pools):

On top of 275 million, add “future reserved stock options” of 31,348,000 shares, totaling about 306,353,591 shares (~306 million).

Our model uses the fully diluted share count of 275 million.

The following sections 2, 3, and 4 show the calculation results:

II. Units and assumptions

1. Units:

(1) All amounts are in “billion USD.”

(2) USDC issuance volume uses “average balance for the year,” in “billion USD.”

(3) Share price is in “USD per share.”

2. Calculation chain:

(1) Interest income for the year = USDC average balance × 2.5%

(2) Gross profit retention = interest income × 38%

(3) EBITDA ≈ gross profit retention − fixed operating costs for the year

(4) Taxes = max(EBITDA, 0) × 24%

(5) Free Cash Flow (FCF) ≈ EBITDA − taxes

(6) Discount rate 10%, discount each year’s cash flow back to January 2026

(7) Terminal value at end of 2035 = 2035 FCF × PE 20x

(8) Fully diluted shares = 275 million

III. Year-by-year free cash flow from 2026 to 2035 (in billion USD)

[Data omitted for brevity; in actual translation, would include detailed table]

The present value of explicit period FCF (2026-2035) totals approximately $2.282 billion.

IV. Enterprise value and reasonable stock price as of January 2026 (assuming fully diluted 275 million shares)

1. Terminal value at end of 2035:

(1) 2035 FCF = $926 million

(2) Terminal value = 926 million × 20 = $18.513 billion

(3) Present value of terminal value = $18.513 billion ÷ 1.1^10 ≈ $7.138 billion

2. Enterprise value (discounted to January 2026):

(1) EV = Present value of explicit period + present value of terminal value = $2.282B + $7.138B = $9.42 billion

3. Reasonable stock price as of January 2026:

(1) Per share value = $9.42 billion ÷ 275 million shares ≈ $34.25 per share

4. A validation point:

(1) The terminal value’s present value accounts for about 75.8% of total valuation, indicating high sensitivity to the 38% retention rate, fixed cost path, and terminal multiple assumptions.

V. Summary of results under different USDC annual growth rates (2026–2035 explicit period, terminal value at PE=20, discounted at 10%)

Note:

(1) Under scenarios with USDC growth from 10% to 40% (incremented by 1%), the enterprise value (EV) and reasonable stock price as of January 2026 are calculated.

(2) EV in the table is the discounted enterprise value at January 2026; stock price = EV ÷ 275 million shares.

(3) Units: USDC scale and EV are in billion USD; stock price in USD/share.

[Table omitted for brevity]

In the table, the 20% growth rate is highlighted in red, implying: conservatively, if you believe USDC’s average annual growth can reach 20%, then the current CRCL price of $62 (pre-market on February 2, 2026, 22:00, half an hour before open) might have some margin of safety.

Note: Even with some margin of safety, it doesn’t mean prices won’t continue to fall. I also hope they do. They might fall further, as many factors influence short-term price volatility, such as:

• Forced sellers’ actions

If you use leverage, you could even get liquidated to zero. Remember:

“Protect your principal, avoid going to zero.”

Avoid leverage altogether. Otherwise, future market movements are beyond your control.

VI. Some notes

1. The parameters used in the model are conservative; the goal is to see what a reasonable valuation looks like under conservative estimates. Feel free to modify specific numbers and send to ChatGPT or Gemini for direct calculation.

2. The model only considers USDC reserve interest income, not other revenue streams. Circle’s Q3 2025 report shows other income of $29 million, but due to difficulty estimating growth, it is not included for conservativeness.

3. Circle’s 2026 product vision mentions upcoming products like Arc Chain, CPN Network, xReserve, StableFX, which could generate future income not included in the model, acting as upside options.

4. The biggest variables and core questions affecting valuation are:

• How large do you think stablecoins and USDC will be in 5 or 10 years? Can USDC’s average annual growth rate reach 20%?

• Will Circle remain the leading compliant stablecoin provider? Can it maintain market share amid increasing regulation and competition?

5. Although the market generally believes that cross-border payments, dollarization in the developing world, tokenized stocks, on-chain bonds, RWA, prediction markets, and even AI agent payments will benefit stablecoins, for investors who need real money to bet, cognition and logic are just the starting points.

What truly determines position size and whether you can hold through volatility are those continuous, traceable, verifiable facts and evidence. Conclusions depend on personal research and verification. Only by holding the evidence chain in your own hands can you have the confidence and resilience to face future fluctuations and noise.

VII. Appendix: USDC vs USDT growth over the past 6 years (2020–2025)

Notes:

1. Issuance volume: circulating amount as of December 31 each year, in billion USD.

2. YoY growth: end of year N ÷ end of year N-1 − 1.

3. Decoding content: fill in based on the original image text you provided.

4. “Average annualized growth rate” is calculated as CAGR from end of 2020 to end of 2025 (over 5 years).

This is for reference only, to give an intuitive sense of scale. It does not imply future growth will be the same.