Circle Internet Group faced a turbulent week as its stock plunged by as much as 18 percent following the announcement of Open USD, a new stablecoin project that could challenge Circle's market position. The response from investors resulted in a loss of billions in market capitalization, driven by the involvement of major financial players like Visa and Mastercard, which heightened market expectations.
The core of Circle’s business model relies on maintaining reserves that back USDC, investing in US Treasuries to earn interest, which constitutes approximately 96% of its revenue. USDC's current market cap stands at around $73 billion, indicating a significant sum yielding revenue for Circle.
Open USD intends to disrupt this model with zero-fee minting and redemptions, along with a revenue-sharing approach that could motivate consortium members to prefer it over USDC. With plans to launch in 2026, the consortium, which includes companies like Coinbase and BlackRock, poses a strategic challenge for Circle, allowing time for it to adapt but increasing competitive pressure.
While analysts have noted that the initial stock sell-off may have been overexpressive, they argue that the stablecoin market is large enough to accommodate multiple players. USDC’s market share can potentially shrink while still achieving growth as the total market expands.
The revenue-sharing strategy of Open USD emphasizes the dynamics of competition in the stablecoin market. If successful, it could pressure Circle to reconsider its own income strategies, as it heavily depends on interest-based revenue streams. The market is watching closely, as the outcome of this initiative could redefine the economics of stablecoins and impact Circle's profitability.