Circle's IPO filing draws criticism over its Bitcoin strategy and broader financial stability

The company is best known for issuing the USDC stablecoin, its recent filings have revealed details that have prompted skepticism across the crypto space.

Circle’s initial public offering (IPO) filing has drawn sharp criticism from industry insiders, who question its Bitcoin strategy and broader financial stability.

While the company is best known for issuing the USDC stablecoin, its recent filings have revealed details that have prompted skepticism across the crypto space.

Heavy on altcoins, light on Bitcoin and Ethereum

Circle’s crypto holdings show a surprising position heavily skewed toward altcoins over Bitcoin (BTC) and Ether (ETH).

As of Dec. 31, 2024, the company held just 73 BTC, valued at roughly $6.78 million, and 1,746 ETH, for a total of about $5.82 million.

These figures are notably small, especially compared to Tether’s 92,000 BTC, which is valued at approximately $7.64 billion and ranks among the top six Bitcoin holdings globally.

Instead, Circle appears to be focused more heavily on emerging blockchains. Its altcoin portfolio includes 6.25 million Sei tokens, 2.3 million Sui tokens, and over 867,000 Optimism tokens. In addition, the firm owns over 217,000 Aptos tokens and other unspecified digital assets that contribute $3.37 million to the portfolio.

The combined fair value of these assets, $18.7 million, significantly outpaces its Bitcoin and Ethereum allocations.

This strategy has led some to question Circle’s long-term confidence in Bitcoin and Ethereum. While it may reflect optimism around emerging ecosystems, many see it as a risky move that could backfire, further cutting into Circle’s credibility.

Richard Heart, the founder of HEX, expressed surprise at the small size of Circle’s Bitcoin and Ethereum positions.

“Circle, the company of USDC fame, had $7M of Bitcoin and $6M of Ethereum Dec 31, 2024. That’s a very small crypto holding for a company of their size and a year-to-date loss of $4M on these two coins alone. Some companies & people doing well are better for Bitcoin and Ethereum price than others. Honor them and show them respect,” Heart said.

Circle’s valuation subject to scrutiny

Besides its paltry Bitcoin and Ethereum holdings, industry insiders are also examining Circle’s financial disclosures closely.

Omar Kanji, a partner at Dragonfly, took to X, formerly known as Twitter, to criticize Circle’s IPO filing, questioning how the company justifies a $5 billion valuation.

He highlighted several issues, including ballooning compensation costs of $250 million annually and $140 million in general expenses.

Kanji went on to mention that Circle’s revenue model is heavily reliant on interest rates, which have likely peaked, putting further pressure on its core revenue stream.

Concluding his thoughts, Kanji stated that the IPO might be a desperate bid for liquidity, deeming Circle’s business model structurally flawed.

Finally, considering Coinbase’s significant share in USDC-related revenue, Kanji believes it could make a move to acquire Circle post-IPO if its stock price struggles.

Estimating that Coinbase nets nearly $900 million out of Circle’s $1 billion income from USDC, highlighting the dependency, especially if the IPO flops.

suggesting that if the IPO doesn't go well, or if Circle's stock price struggles, Coinbase could swoop in and acquire the company. He also mentioned that there might be a bidding war emerging, with Ripple potentially joining the fray at a valuation between $15 billion and $20 billion.

This would make for an interesting twist in the ongoing saga of the crypto industry's competitive landscape. It will be interesting to see how these events unfold and what impact they will have on the broader cryptocurrency market.